Question

Menlo company distributes a single product. the company’s sales and expenses for last month follow: total per unit sales $ 450,000 $ 30 variable expenses 180,000 12 contribution margin 270,000 $ 18 fixed expenses 216,000 net operating income $ 54,000 required: 1. what is the monthly break-even point in unit sales and in dollar sales? 2. without resorting to computations, what is the total contribution margin at the break-even point?

Answer 1

1. Contribution Margin (in unit sales) = $18

Contribution Margin (in dollar sales) : $ 270,000 (given)

Fixed Cost = $216,000

Break even point (in unit sales) = Fixed Cost ÷ Contribution margin per unit

= $216,000 ÷ 18

= 12000

Break even point (in dollar sales) = Sales price per unit × Break even (in unit)

= $30 × 12000

= $360,000

2. Contribution Margin at the break even point is the total fixed cost ($216,000)