Problem 5 Pringle Company distributes a single product. The companys sales and expenses for a...
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Problem 5 Pringle Company distributes a single product. The companys sales and expenses for a recent month follow: Total Per Unit Sales $600,000 $40 Variable expenses 420000 28 Contribution margin 180000 $12 Fixed expenses 150000 Net operating income $30,000 Required: 1. What is the monthly break-even point in units sold and in sales dollars? 2. Without resorting to computations, what is the total contribution margin at the break-even point? 3. How many units would have to be sold each month to earn a target profi t of $18,000? Use the contribution margin method. Verify your answer by preparing a contribution format income statement at the target level of sales. 4. Refer to the original data. Compute the companys margin of safety in both dollar and percentage terms. 5. What is the companys CM ratio? If monthly sales increase by $80,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
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