Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company's fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year.
Required:
Question 1. What are the variable expenses per unit?
Question 2. Using the equation method:
a. What is the break-even point in units and sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of $60,000?
c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit. What is the company's new break-even point in units and sales dollars?
Question 3. Repeat (2) above using the formula method.