E4-12 Menlo Company distributes a single product. The company’s sales and expenses for last month follow:
Total Per Unit
Sales $1,092,000 $70
Variable expenses 764,400 49
Contribution margin 327,600 $21
Fixed expenses 264,600
Net operating income $63,000
Requirement1:
What is the monthly break-even point in units sold and in sales dollars? (Omit the “$” sign in your response.)
Requirement 2:
Without resorting to computations, what is the total contribution margin at the break-even point? (Omit the “$” sign in your response.)
Requirement 3:
How many units would have to be sold each month to earn a target profit of $96,600? Use the formula method.
Units sold units
Requirement 4:
Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms. (Round your percentage value to 2 decimal places. Omit the “$” and “%” signs in your response.)
Dollars Percentage Margin of safety $ %
Requirement 5: What is the company’s CM ratio? If sales increase by $91,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?(Omit the “$” and “%” signs in your response.)
CM ratio %
Increased net operating income $
