Question

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

Answer 1

The monthly break-even point in units sold and sales in dollars are 12,200 units and $488,000 respectively.

The Break−even point in units sales can be calculated using the below-mentioned formula,

$Break−Even Point In Units Sales = Fixed Expenses / Contribution Margin Per Unit$

Now, by using the specified values in the aforementioned calculation, we obtain,

$Break−Even Point In Units Sales = 146,400/ 12$

= 12,200 units

To calculate the Break−even point in dollars we first have to calculate the contribution margin ratio.

The Contribution margin ratio can be calculated using the below-mentioned formula

$Contribution Margin Ratio = \frac{Contribution Margin Per Unit}{Selling Price Per Unit} * 100$

Now, by using the specified values in the aforementioned calculation, we obtain,

$Contribution Margin Ratio = \frac{12}{40} * 100$                                    

= 30%

$Break−Even Point In Dollars = Fixed Expenses/Contribution Margin Ratio$

Now, by using the specified values in the aforementioned calculation, we obtain,

Break−even point in dollars = $146,400/30 Percent$                                          = $146,400/0.30$                                          

= $488,000

Hence, The monthly break-even point in units sold and in sales dollars is 12,200 units and $488,000 respectively.

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