Question:
Menlo Company distributes a single product. The company's sales and expenses for last month follow:
|
Total
|
Per Unit
|
|
Sales
|
$
|
314,000
|
|
$
|
20
|
|
Variable expenses
|
|
219,800
|
|
|
14
|
|
|
|
|
|
|
|
Contribution margin
|
|
94,200
|
|
$
|
6
|
|
Fixed expenses
|
|
77,400
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
$
|
16,800
|
|
|
|
|
|
|
|
|
|
|
Required:
1. What is the monthly break-even point in unit sales and in dollar sales?
2. Without resorting to computations, what is the total contribution margin at the break-even point?
3-a How many units would have to be sold each month to earn a target profit of $27,000? Use the formula method.
3-b Verify your answer by preparing a contribution format income statement at the target sales level.