Business, 17.03.2020 04:37 alissa64

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 $60,000 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4 per unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $60,000?

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Answer from: kenyardrgz15

Missing part of Question

Lindon Company is the exclusive distributor for an automotive product that sells for $40 per unit and has a CM ratio of 30%. The company’s fixed expenses are $180,000 per year. The company plans to sell 16,000 units this year

1. Variable Expenses per Unit = $28

2. Units Sales = 15,000; Dollar Sales = $600,000

3. Unit Sales = 20,000; Dollar Sales = $800,000 units

4. Unit Sales = 11,250 units

Dollar Sales = $450,000

Explanation:

1. The Variable Expenses per unit

This is calculated as follows;

$40 * (100% - 30%)

= $40 *70%

= $28

2. Break-even point in unit sales and in dollar sales is calculated as follows;

For unit sales;

Using the following formula

Profit = Unit CM * Q - Fixed Expenses

Where Profit = $0

Unit CM = $40 - $28 = $12

Q = Unit Sales

Fixed Expenses = $180,000.

So, we have

$0 = $12 * Q - $180,000

$12Q = $180,000

Q = $180,000/$12

Q = 15,000 units

For Dollar sales

Dollar Sales = 15,000 units * $40 per unit

Dollar Sales = $600,000

3. What amount of unit sales and dollar sales is required to attain a target profit of $60,000 per year?

Here Profit = $60,000

Using

Profit = Unit CM * Q - Fixed Expenses

We have

$60,000 = $12Q - $180,000

$12Q = ,$180,000 + $60,000

$12Q = $240,000

Q = $240,000/$12

Q = 20,000 units

Dollar Sales = 20,000 units * $40 per units

Dollar Sales = $800,000 units

Using Profit = Unit CM * Q - Fixed Expenses

Here,

Profit = $0

Unit CM = $40 - $28 + $4 = $16

Fixed Expenses = $180,000

So, we have

$0 = $16Q - $180,000

$16Q = $180,000

Q = $180,000/$16

Q = 11,250 units

Dollar sales. = 11,250 units * $40 per unit

Dollar Sales = $450,000

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