Homework SourseLindon Company is the exclusive distributor for an automotiv
Lindon Company is the exclusive distributor for an automotive product that sells for $40.00 per unit and has a CM ratio of 32%. The company\'s fixed expenses are $230,400 per year. The company plans to sell 19,000 units this year. Required: 1. What are the variable expenses per unit? (Round your answer to 2 decimal places.) Variable expenses 27.20 per unit intermediate calculations.) Break-even point in unit sales Break-even point in dollar sales 720,000 
Solution
1) Variable expense $ 27.20 per unit Working: Per Unit Sales $ 40.00 CM $ 40 x 32% $ 12.80 Variable expense $ 27.20 2a) Break even point in unit sales 18,000 Break even point in dollar sales $ 7,20,000 Working: Break even point in unit sales = Fixed Expense / CM per unit = $ 2,30,400 / $ 12.80 = 18,000 Break even point in dollar sales = Fixed Expense / CM ratio = $ 2,30,400 / 32% = $ 7,20,000 2b) Sales level in units 23,000 Sales level in dollars $ 9,20,000 Working: i. Fixed Expense $ 2,30,400 Annual profit $ 64,000 Target Contribution Margin $ 2,94,400 CM per unit $ 12.80 Target Sales in units 23,000 ii. Fixed Expense $ 2,30,400 Annual profit $ 64,000 Target Contribution Margin $ 2,94,400 CM ratio 32% Target Sales in units $ 9,20,000 2c New break even point in unit sales 13,241 New break even point in dollar sales $ 5,29,655 Working: i. Existing variable expense $ 27.20 reduction in variable expense $ 4.60 Revised variable expense $ 22.60 ii. Revised Contribution Margin = $ 40.00 - $ 22.60 = $ 17.40 Break even in units = $ 2,30,400 / $ 17.40 = 13,241 iii. CM ratio = Contribution Margin / Sales = $ 17.40 / $ 40.00 = 43.5% Break even in sales dollars = Fixed Expense / CM Ratio = $ 2,30,400 / 43.5% = $ 5,29,655