EXERCISE 5-14 Break-Even and Target Profit Analysis L05-3, LO5-4, LO5-5, LO5-6 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. 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? 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? 4. EXERCISE 5-15 Operating Leverage LO5-1, LO5-8 Magic Realm, Inc., has developed a new fantasy board game. The company sold 15,000 games las per year , and variable expenses are $6 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1. Prepare a contribution format income statement for the game last year and compute the degree of operating leverage. 2. Management is confident that the company can sell 18,000 games next year (an increase of 3,000 games, or 20%, over last year). Given this assumption: What is the expected percentage increase in net operating income for next year? What is the expected amount of net operating income for next year? (Do not prepare an income statement; use the degree of operating leverage to compute your answer.) R 1 2 4 a. b. 5