Pringle Company distributes a single product. The company's sales and expenses for a recent month follow:
| |
Total |
Per Unit |
| Sales |
$ |
314,000 |
|
$ |
20 |
| Variable expenses |
|
219,800 |
|
|
14 |
| |
| Contribution margin |
|
94,200 |
|
$ |
6 |
| Fixed expenses |
|
72,000 |
|
| |
|
|
| Net operating income |
$ |
22,200 |
|
|
|
| |
|
|
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?
3. How many units would have to be sold each month to earn a target profit of $33,600? Use the formula method.
Units sold
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.)
5. What is the company's CM ratio? If monthly sales increase by $75,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?