Pringle Company distributes a single product. The company's sales and expenses for a recent month follow:
|
Total |
Per Unit |
| Sales |
$ |
304,000 |
|
$ |
20 |
| Variable expenses |
|
212,800 |
|
|
14 |
|
|
|
|
|
|
| Contribution margin |
|
91,200 |
|
$ |
6 |
| Fixed expenses |
|
75,600 |
|
|
|
|
|
|
|
|
|
| Net operating income |
$ |
15,600 |
|
|
|
|
|
|
|
|
|
|
| Required: |
| 1. |
What is the monthly break-even point in units sold and in sales dollars? |
|
|
| Break-even point in unit sales |
units |
| Break-even point in sales dollars |
$ |
|
| 2. |
Without resorting to computations, what is the total contribution margin at the break-even point? |
| Total contribution margin |
$ |
| 3. |
How many units would have to be sold each month to earn a target profit of $36,000? Use the formula method. |
| 4. |
Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. (Round your percentage answer to 2 decimal places.)
|
|
Dollars |
Percentage |
| Margin of safety |
$ |
% |
|
| 5. |
What is the company's CM ratio? If monthly sales increase by $64,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
|
|
|
| CM ratio |
% |
| Net operating income increases by |
$ |