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.

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 $60,000 per year? 4. 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 unit sales and in dollar sales? What dollar sales is required to attain a target profit of $60,000?

Part 1 Break-even point in unit sales and in dollar sales

Break-even point in unit sales  = 15,000

Break-even point in dollar sales  = $ 600,000

Part 2 What amount of unit sales and dollar sales is required to attain a target profit of $60,000 per year

unit sales required to attain a target profit = 20,000

dollar sales required to attain a target profit = $ 800,000

Part 3 (A) The company is able to reduce its variable expenses by $4 per unit. What is the company’s new break-even point in unit sales and in dollar sales

Break-even point in unit sales = 11,250

Break-even point in dollar sales= $450,000

Part 3 (B)  the company is able to reduce its variable expenses by $4 per unit. What dollar sales is required to attain a target profit of $60,000

unit sales required to attain a target profit = 15,000

dollar sales required to attain a target profit = $ 600,000

Explanation:

Part 1 Break-even point in unit sales and in dollar sales

Break-even point in unit sales = Fixed Costs/ Contribution per unit

                                                    = $180,000 /  $40× 30%

                                                    = 15,000

Break-even point in dollar sales = Fixed Costs / Contribution Margin Ratio

                                                       = $180,000/0.30

                                                       = $ 600,000

Part 2 What amount of unit sales and dollar sales is required to attain a target profit of $60,000 per year

unit sales required to attain a target profit = (Fixed Costs + Target Profit)/Contribution per unit

                                                                   =($180,000+$60,000)/($40× 30%)

                                                                  = 20,000

dollar sales required to attain a target profit = unit sales required to attain a target profit × Selling Price per Unit

                                                                        = 20,000 × $40.00

                                                                        = $ 800,000

Part 3 (A) The company is able to reduce its variable expenses by $4 per unit. What is the company’s new break-even point in unit sales and in dollar sales

Break-even point in unit sales = Fixed Costs/ Contribution per unit

                                                    = $180,000 /  ($40-(($40× 70%) - $4))

                                                    = $180,000/ $16

                                                    = 11,250

Break-even point in dollar sales = Fixed Costs / Contribution Margin Ratio

                                                       = $180,000/ ($16/$40)

                                                       =  $180,000/ 0.40

                                                       = $450,000

Part 3 (B)  the company is able to reduce its variable expenses by $4 per unit. What dollar sales is required to attain a target profit of $60,000

unit sales required to attain a target profit = (Fixed Costs + Target Profit)/Contribution per unit

                                                                   =($180,000+$60,000)/$16

                                                                  = 15,000

dollar sales required to attain a target profit = unit sales required to attain a target profit × Selling Price per Unit

                                                                        = 15,000 × $40.00

                                                                        = $ 600,000

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.

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