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

Total Per Unit
Sales $1,057,000 $70
Variable expenses 739,900 49
Contribution margin 317,100 $21

Fixed expenses 268,800

Net operating income $48,300



Requirement 1:
What is the monthly break-even point in units sold and in salesdollars? (Omit the "$" sign in your response.)


Monthly break-even point units
Sales $


Requirement 2:
Without resorting to computations, what is the total contributionmargin at the break-even point? (Omit the "$" sign in yourresponse.)

Total contribution margin at the break-even point $

Requirement 3:
How many units would have to be sold each month to earn a targetprofit of $119,700? Use the formula method.

Units sold units

Requirement 4:
Refer to the original data. Compute the company's margin of safetyin both dollar and percentage terms. (Round your percentage valueto 2 decimal places. Omit the "$" and "%" signs in yourresponse.)

Dollars Percentage%
Margin of safety $

--------------------------------------------------------------------------------

Requirement 5:
What is the company's CM ratio? If sales increase by $86,000 permonth and there is no change in fixed expenses, by how much wouldyou expect monthly net operating income to increase? (Round yourpercentage value to nearest whole percent. Round your dollar valueto the nearest dollar amount. Omit the "$" and "%" signs in yourresponse.)



CM ratio %
Increased net operating income $


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Irving Heathcote
Irving HeathcoteLv2
28 Sep 2019

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I'd like help with the following problem, but please explain howyou arrive at your answers. Thank you.

Exercise5-11 Break-Even Analysis; Target Profit; Margin of Safety; CM Ratio[LO1, LO3, LO5, LO6, LO7]
Pringle Company distributes asingle product. The company’s sales and expenses for a recent monthfollow:
Total Per Unit
Sales $ 304,000 $ 20
Variable expenses 212,800 14
Contribution margin 91,200 $ 6
Fixed expenses 74,400
Net operating income $ 16,800
Required:
1. What is the monthlybreak-even point in units sold and in sales dollars? (Omit the "$"sign in your response.)
Break-even point in unitsales
units
Break-even point in salesdollars $
2. Without resorting tocomputations, what is the total contribution margin at thebreak-even point? (Omit the "$" sign in your response.)
Total contribution margin
$
3. How many units would haveto be sold each month to earn a target profit of $31,800? Use theformula method.
Units sold
Refer to the original data.Compute the company's margin of safety in both dollar andpercentage terms. (Round your percentage answer to 2 decimalplaces. Omit the "$" and "%" signs in your response.)
Dollars Percentage
Margin of safety
$
%
5. What is the company’s CMratio? If monthly sales increase by $63,000 and there is no changein fixed expenses, by how much would you expect monthly netoperating income to increase? (Omit the "$" and "%" signs in yourresponse.)
CM ratio
%
Net operating income increasesby $

ue to erratic sales of its sole product—a high-capacity battery forlaptop computers—PEM, Inc., has been experiencing difficulty forsome time. The company's contribution format income statement forthe most recent month is given below:


Sales (13,400 units at $20 per unit) $268,000
Variable expenses
160,800
Contribution margin 107,200
Fixed expenses 119,200
Net operating loss
$(12,000)

Requirement 1:
Compute the company's CM ratio and its break-even point in bothunits and dollars. (Omit the "%" and "$" signs in yourresponse.)


CM ratio %
Break-even point in units units
Break-even point in dollars $


Requirement 2:
The president believes that a $8,000 increase in the monthlyadvertising budget, combined with an intensified effort by thesales staff, will result in an $71,000 increase in monthly sales.If the president is right, by how much will the company's netoperating income increase or decrease? (Use the incrementalapproach in preparing your answer.) (Negative amount should beindicated by a minus sign. Omit the "$" sign in yourresponse.)

Net operating income $

Requirement 3:
Refer to the original data. The sales manager is convinced that a10% reduction in the selling price, combined with an increase of$34,000 in the monthly advertising budget, will cause unit sales todouble. What will the new contribution format income statement looklike if these changes are adopted? (Net loss should be indicated bya minus sign. Omit the "$" sign in your response.)


Sales $
Variable expenses

Contribution margin
Fixed expenses

$

Requirement 4:
Refer to the original data. The Marketing Department thinks that afancy new package for the laptop computer battery would help sales.The new package would increase packaging costs by .40 cents perunit. Assuming no other changes, how many units would have to besold each month to earn a profit of $4,900?

Sales units


Requirement 5:
Refer to the original data. By automating certain operations, thecompany could reduce variable expenses in half. However, fixedcosts would increase by $121,000 each month.

(a)
Compute the new CM ratio and the new break-even point in both unitsand dollars. (Omit the "%" and "$" signs in your response.)


CM ratio %
Break-even point in units units
Break-even point in dollars $

(b)
Assume that the company expects to sell 20,600 units next month.Prepare two contribution format income statements, one assumingthat operations are not automated and one assuming that they are.(Show data on a per unit and percentage basis, as well as in total,for each alternative.) (Omit the "$" and "%" signs in yourresponse.)

Not Automated Automated
Total Per Unit % Total Per Unit %
Sales (20,600 units) $ $ $ $
Variable expenses






Contribution margin
$


$

Fixed expenses
Net operating income
$

$

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