BREAK EVEN POINT ANALYASIS

1.        Sensabaugh Inc., a company that produces and sells a single product, has   provided its contribution format income statement for January.

 

                   Sales (1800 units)                           $91,800

                   Variable expenses                          59,400

                   Contribution margin                     32,400

                   Fixed expenses                     27,000

                   Net operating income                      5,400

 

                   If the company sells 1,600 units, what is the total contribution margin?

 

2.        Last year, Farrer Corporation had sales of $1,500,000, variable expenses of $900,000, and fixed expenses of $400,000. What would be the dollar sales at the break-even point?

 

3.             Kendall Company has sales of 1,000 units at $60 a unit. Variable expenses are 30% of the selling price. If total fixed expenses are $30,000, hat is the degree of operating leverage?

 

4.             The following is Allison Corporation’s contribution format income statement for last month:

    Sales $800,000  Less variable expenses   300,000  Contribution margin 500,000  Less fixed expenses   400,000  Net income $100,000  

The company has no beginning or ending inventories. The company produced and sold 10,000 units last month.

 

a.       What is the company’s contribution margin ratio?

b.      What is the company’s break-even sales in dollars?

c.       If sales increase by 200 units, by how much should net operating income increase?

d.      How many units would the company have to sell to attain target profits of $120,000?

e.       What is the company’s margin of safety percentage?

f.       What is the company’s degree of operating leverage?