# 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?

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?

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