Question: Lindon Company is the exclusive distributor for an automotive product that sells for $27.00 per unit and has a CM ratio of 30%. The company's fixed expenses are $153,090 per year. The company plans to sell 10,800 units this year.
1. What are the variable expenses per unit?
2. Use the equation method:
a. What is the break-even point in unit sales and in dollar sales?
b. What amount of unit sales and dollar sales is required to earn an annual profit of $40,500?
c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.70 per unit. What is the company's new break-even point in unit sales and in dollar sales?
3.Repeat (2) above using the formula method.
a. What is the break-even point in unit sales and in dollar sales?
b. What amount of unit sales and dollar sales is required to earn an annual profit of $40,500?
c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.70 per unit. What is the company's new break-even point in unit sales and in dollar sales?