Lindon Company is the exclusive distributor for an automotive product that sells for $44.00 per unit and has a CM ratio of 30%. The company’s fixed expenses are $283,800 per year. The company plans to sell 25,100 units this year. Required: 1. What are the variable expenses per unit? (Round your "per unit" answer to 2 decimal places.) 2. What is the break-even point in unit sales and in dollar sales? 3. What amount of unit sales and dollar sales is required to attain a target profit of $151,800 per year? 4. Assume that by using a more efficient shipper, the company is able to reduce its variable expenses by $4.40 per unit. What is the company’s new break-even point in unit sales and in dollar sales? What dollar sales is required to attain a target profit of $151,800?

current scenario

Variable cost: $30.80

BEP in dollar $946.000‬

Sales to profit of 151,800:   $   1,452,000

if variable cost decrease by $4.40

BEP $709,500

to profit: $1,089,000

Explanation:

the Contribution margin ratio is what is left fro mthe sales price after paying the variable cost:

( 44 - variable cost ) / 44 = 0.3

44 - 0.3 x 44 = variable cost = 30,80

The break even point is the sales volume at which the operating income is zero:

283,800 / 0.3 = 946.000‬

A profit of 151,800 is achieve when selling above enought to make that 30%

151,800 / 0.3   =   506.000‬   + 946,000 = 1,452,000

other way would be:

( 283,800 + 151,800 ) / 0.3 = 1,452,000

if variable expense decrease by 4.4 then:

(44 - 30.8 + 4.4) / 44 = 0.4

we recalculate:

283,800 / 0.4 = 709,500

to profit

( 283,800 + 151,800 ) / 0.4 = 1,089,000

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