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 $22.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $105,600 per year. The company plans to sell 17,400 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 $39,600 per year?

4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $2.20 per unit. What is the company’s new break-even point in unit sales and in dollar sales?

1. Variable expense per unit 2. Break-even point in units 15.40 16,000 $ 352,000 Break-even point in dollar sales 3. Unit sales needed to attain target profit Dollar sales needed to attain target profit 4. New break-even point in unit sales New break-even point in dollar sales Doller sales needed to attain target profit

Explanation / Answer

1. Variable expense per unit = 22*70% = 15.40 per unit

2. Break even point in units = 105600/6.60 = 16000 units

Break even sales = 16000*22 =352000

3. Units sales needed to attain target profit = (105600+39600)/6.6 = 22000 units

Dollar sales needed to attain target profit = 22000*22 = 484000

4. New break even point in unit sales = 105600/8.80 = 12000 units

New break even sales = 12000*22 = 264000

Dollar sales needs to attain target profit = (105600+39600)/8.8*22 = 363000

Related Questions

Navigate

• Browse (All)
• Browse L
• Subjects

---

---

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