Managerial Accounting for Managers: E6-13 Lindon Company is the exclusive distributor

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Managerial Accounting for Managers
Exercise 6-13 Target Profit and Break-Even Analysis
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.

Required:
1. What are the variable expenses per unit?
2. Using the equation method:
a. What is the break-even point in units and sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of \$60,000?
c. 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 units and sales dollars?
3. Repeat (2) above using the formula method.
a. What is the break-even point in units and sales dollars?
b. What sales level in units and in sales dollars is required to earn an annual profit of \$60,000?
c. 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 units and sales dollars?