Lindon Company is the exclusive distributor for an automotive product that sells for $37.00 per...
Question:
Lindon Company is the exclusive distributor for an automotive product that sells for $37 per unit and has a CM ratio of 33%.
The company's fixed expenses are $354,090 per year.
The company plans to sell 30,000 units this year.
Required:
1. What are the variable expenses per unit?
(Round your answer to 2 decimal places.)
2. Use the equation method:
a. What is the break-even point in unit sales and in dollar sales?
(Do not round intermediate calculations.)
b. What amount of unit sales and dollar sales is required to earn an annual profit of $61,050?
(Do not round intermediate calculations.)
c.) Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.60 per unit.
What is the company's new break-even point in unit sales and in dollar sales?
(Do not round intermediate calculations. Round up break even point answers to the nearest whole number.)
3. Repeat (2) above using the formula method.
a. What is the break-even point in unit sales and in dollar sales?
(Do not round intermediate calculations.)
b. What amount of unit sales and dollar sales is required to earn an annual profit of $61,050?
(Do not round intermediate calculations.)
c. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.60 per unit.
What is the company's new break-even point in unit sales and in dollar sales?
(Do not round intermediate calculations. Round up break-even point answers to the nearest whole number.)
Break-even point:
When the company earns no profit earned and loss on its revenue turnover it is called a break-even point. The contribution margin formula is used in calculating the break-even point and used in CVP analysis for various decision tree simulations.
Answer and Explanation: 1
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View this answerThe following information is given
- The selling price per unit is $37
- the contribution margin ratio is 33%
- The fixed costs is $354,090 per year
1)...
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Target-Profit & Break-Even Analysis
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Chapter 3 / Lesson 5
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Total costs are compared to total revenue and are either lower (profit), higher (loss), or equal (break-even point). Learn to calculate this and identify target profit, as well as establish a margin of safety to accommodate unanticipated risks.
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