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 72,600 Net operating income $ 21,600 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 attain a target profit of $30,000? 3-b. Verify your answer by preparing a contribution format income statement at the target sales level. 4. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 5. What is the company’s CM ratio? If sales increase by $70,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

What is the monthly break-even point in unit sales and in dollar sales?

	Break-even point in unit sales units Break-even point in dollar sales

Without resorting to computations, what is the total contribution margin at the break-even point?

	Total contribution margin

How many units would have to be sold each month to attain a target profit of $30,000?

Verify your answer by preparing a contribution format income statement at the target sales level. Menlo Company Contribution Income Statement Total Per Unit

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 (i.e. 0.1234 should be entered as 12.34).)

	Dollars Percentage Margin of safety %

What is the company’s CM ratio? If sales increase by $70,000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

	CM ratio % Net operating income increases by

Answer 1