Lindon Company is the exclusive distributor for an automotive product that sells

Question

Lindon Company is the exclusive distributor for an automotive product that sells for $36.00 per unit and has a CM ratio of 30% company's fixed expenses are $210,600 per year. The company plans to sell 22,300 units this year. Required 1. What are the variable expenses per unit? 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $102,600 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $3.60 per unit. What is company's new break even point in unit sales and in dollar sales? 1 Variable expense per unit 25 20 2. Break-even point in units 3 Unit sales needed to attain target profit 4. New break-even point in unit sales Break-even point in dollar sales Dollar sales needed to attain target profit New break-even point in dollar sales Dollar sales needed to attain target profit

Explanation / Answer

1) Variable expense per unit = 36*70% = 25.20 per unit

2) Break even point in units = 210600/(36-25.20) = 19500 units

Break even point in dollars sales = 19500*36 = $702000

3) Units sales needed to attain target profit = (210600+102600)/10.8 = 29000 Units

Dollar sales needed to attain target profit = 29000*36 = $1044000

4) New break even point in units sales = 210600/14.40 = 14625 Units

New break even point in dollar sales = 14625*36 = $526500

Dollar sales needed to attaing target profit = (210600+102600)/14.40*36 = $783000

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