Pringle Company distributes a single product. The company\'s sales and expenses

Question

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

Total Per Unit

sales $600,000 $50

Variable expenses $456,000 $38

Contribution margin $144,000 $12

Fixed expenses $100,000

Net Operating income $44,000

1. What is the break even point in units sold and 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 $21,000?

4. Refer to original date. Compute the company's margin of safety in both dollars and percentages.

5. What is the company's CM ration? If monthly sales increases by $60,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

Explanation / Answer

Solution:

1.

2.

3.

4.

Sales = 50 Less: Variable cost                               38.00 Contribution 12 CM Ratio = Contrbution / Sales * 100 24% Break even point in units = Fixed cost / Contribution per unit Break even point in units = $ 100,000/ $ 12                               8,333 Fixed cost 100,000 Contribution per unit 12 Break even point in dollars = Fixed cost / Contribution margin Break even point in dollars = $ 100,000/ 24 %                          416,667 Fixed cost 100,000 Contribution margin 24%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.