Question:
Menlo Company distributes a single product. The company's sales and expenses for last month follow:

Total

Per Unit

Sales

$

314,000


$

20

Variable expenses


219,800



14







Contribution margin


94,200


$

6

Fixed expenses


77,400










Net operating income

$

16,800











Required:
1. What is the monthly breakeven point in unit sales and in dollar sales?
2. Without resorting to computations, what is the total contribution margin at the breakeven point?
3a How many units would have to be sold each month to earn a target profit of $27,000? Use the formula method.
3b Verify your answer by preparing a contribution format income statement at the target sales level.