## Description

Variable Expenses

Contribution margin

Fixed Expenses

Net operating income

Total

Per Unit

$600,000.00

$40.00

$420,000

28

$180,000.00

$12.00

$150,000

$30,000.00

1

Unit sales to break even

Unit sales in dollars

12500

500000

2

3 18000=$12xQ-$150,000

12xQ=$18,000+150,000=168,000

168000/12

14,000 need to be sold

4 Sales

Break even sales

Margin in Safety $$

Margin safety %

5 CM Ratio

Sales

Variable Expenses

Contribution margin

Fixed Expenses

Net operating income

600,000

500,000

100,000

16.67%

30.00%

Present

Expected Increase

$600,000.00 $680,000 $80,000.00

$420,000 $476,000 $56,000.00

$180,000.00 $204,000 $24,000.00

$150,000 $150,000

$0.00

$30,000.00

$54,000 $24,000.00

Pringle Company distributes a single product. The company’s sales and expenses for a recent month follow:

Pringle Company distributes a single product. The company’s sales and expenses for a recent month follow:

p. 216

Required:

1. What is the monthly break-even point in units sold and in sales dollars?

Without resorting to computations, what is the total contribution margin at the break-even point?

How many units would have to be sold each month to earn a target profit of $18,000? Use the formula method. Verify your answer by preparing a contribution format income statement at the target level of sales.

Refer to the original data. Compute the company’s margin of safety in both dollar and percentage terms.What is the company’s CM ratio? If monthly sales increase by $80,000 and there is no change in fixed expenses, by how muchwould you expect monthly net operating income to increase?

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