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Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 320,000 $ 20 Variable...

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Accounting

Menlo Company distributes a single product. The company’s salesand expenses for last month follow:

TotalPer Unit
Sales$320,000$20
Variable expenses224,00014
Contribution margin96,000$6
Fixed expenses73,800
Net operating income$22,200


Required:

1. What is the monthly break-even point in unit sales and indollar sales?

2. Without resorting to computations, what is the totalcontribution margin at the break-even point?

3-a. How many units would have to be sold each month to attain atarget profit of $32,400?

3-b. Verify your answer by preparing a contribution formatincome statement at the target sales level.

4. Refer to the original data. Compute the company's margin ofsafety in both dollar and percentage terms.

5. What is the company’s CM ratio? If sales increase by $74,000per month and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?

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