Pringle Company distributes a single product. The company€™s sales and expenses for a recent month follow:

Required:
1. What is the monthly break-even point in units sold and in sales dollars?
2. Without resorting to computations, what is the total contribution margin at the break-even point?
3. How many units would have to be sold each month to earn a target profit of $18,000? Use the contribution margin method. Verify your answer by preparing a contribution format income statement at the target level of sales.
4. Refer to the original data. Compute the company€™s margin of safety in both dollar and percentage terms.
5. What is the company€™s CM ratio? 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?

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Total Per Unit Sales Variable expenses Contribution margin Fixed expenses Net operating income $600,000 $40 420,000 28 180,000 $12 150,000 S 30,000