Lindon Company is the exclusive distributor for an automotiv

Lindon Company is the exclusive distributor for an automotive product that sells for $38.00 per unit and has a CM ratio of 30%. The company\'s fixed expenses are $228,000 per year. The company plans to sell 23,000 units this year. Required: 1. What are the variable expenses per unit? 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $114,000 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.80 per unit. What is the company\'s new break-even point in unit sales and in dollar sales? 1. Variable expense per unit 2. Break-even point in units Break-even point in dollar sales 3. Unit sales needed to attain target profit Dollar sales needed to attain target profit 4.New break-even point in unit sales New break-even point in dollar sales Dollar sales needed to attain target profit

Solution

CM ratio = 30%

So variable cost ratio = 100-30 = 70%

1) variable expense per unit = 38*70% = $26.60 per unit

2) Break even point in units = 228000/(38-26.60) = 20000 Units

Break even point in dollar sales = 20000*38 = $760000

3) Units sales needed to attain target profit = (228000+114000)/11.40 = 30000 Units

Dollar sales needed to attain target profit = 30000*38 = $1140000

4) New break even point in unit = 228000/15.2 = 15000 Units

New break even point in dollar sales = 15000*38 = $570000

Dollar sales needed to attain target profit = (228000+114000)/15.2*38 = $855000