Question:
Pringle Company distributes a single product. The companyAc€?cs sales and expenses for a recent month follow:
|
Total
|
Per Unit
|
|
Sales
|
$
|
300,000
|
|
$
|
20
|
|
Variable expenses
|
|
210,000
|
|
|
14
|
|
|
|
|
|
|
|
Contribution margin
|
|
90,000
|
|
$
|
6
|
|
Fixed expenses
|
|
73,800
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
$
|
16,200
|
|
|
|
|
|
|
|
|
|
|
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 profit of $40,200? Use the formula method.
4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. (Round your percentage answer to 2 decimal places.)
5. What is the companys CM ratio? If monthly sales increase by $90,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?