PROBLEM $422$ Break$-$Even Analysis; Target Profit Analysis; Margin of Safety; CM Ratio $[$LO$1,$ LO$3,$ LO$5,$ LO$6,$ LO$7]$ Menlo Company distributes a single product. The company$$s sales and expenses for last month follow:

Total

Sales $.........................$ $$450,000$ Variable expenses $...............180,000$ Contribution margin $.............270,000$

Fixed expenses $.................216,000$ Operating income $...............$ $ $54,000$

Required: $1.$ What is the monthly break$-$even point in unit sales and in dollar sales? $2.$ 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 $$90,000?$ Verify your answer by preparing a contribution format income statement at the target sales level.

$4.$ Refer to part $3$ and now assume that the tax rate is $30\%.$ How many units would need to be sold each month for an after$-$tax target profit of $$90,000?$

$5.$ Refer to the original data. Compute the company$$s margin of safety in both dollar and percentage terms.

$6.$ What is the company$$s CM ratio? If sales increase by $$50,000$ per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?