Question

# Pringle Company distributes a single product. The company's sales and expenses for a recent month follow: 1. What is the monthly break-even point in units sold and in sales dollars?

2. What is the company's CM ratio and the variable expense ratio? 3. Without resorting to computations, what is the total contribution margin at the break-even point? 4. If monthly sales increase by \$80,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase? 5. Refer to the original data. Compute the company's margin of safety in both dollar and percentage terms. 6. How many units would have to be sold each month to earn a target profit of \$18,000? 7. Pringle Company is considering enhancing its profits by adding a high quality speaker to its telephone devices. The variable expenses per unit will change from \$56 (current) to be \$60 (proposed). The suggestion will reduce fixed expenses from \$150,000 (current) to be\$102,000 (proposed). If sales per unit equal \$80 (will not change) and the company sells 10,000 units, by how much will the profits increase/decrease? 8. Calculate the break-even sales in dollars for the proposed plan in required 7.

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