Menlo Company distributes a single product The companys sale

Menlo Company distributes a single product. The company\'s sales and expenses for last month follow Tot al Per Unit 608,000 40 Sales Variable expenses Contribution margin Fixed expenses Net operating income 425,600 182,400 154,800 28 $ 12 $27,600

Solution

Rq 1: Break even unit: Fixed cost/ CM pe unit $ 154800 /12 = 12900 unitss Break even in $: Fixed cost / CM ratio 154800 / 30% = $ 516000 Req 2: Total contribution margin at Break even: $ 154800 Req 3: Desired profit: 51600 Desired contribution: 51600+154800=206400 Target sale s in unit: Desired contribution/ CM per unit 206400 /12 = 17200 units Req 4: Contribution margin Income Statement Total Per unit Sales revenue 688000 40 Less: variable cost 481600 28 Contribution 206400 12 Less: Fixed cost 154800 Net income 51600 Req 5: Margin of safety in $: Net income / CM ratio $ 27600 / 30% =92000 % of MOS to total sales: 92000 /608000 *100 = 15.13% Req 6: Cm ratio: 30% Net income increase for increasse in sales: 80000*30% = 24000