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

Important Reminder!!! There might be other versions of this problem - amounts and dates have been changed - so please make sure you review and compare this tutorial to the problem in your homework. Even with different amounts, format and way of solving the problem is still the same so pleases be guided accordingly.

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?
Powered by