Review Problem : Break-even point

Problem 4: (15 points)

Voltar Company manufactures and sells a telephone answering machine. The company's contribution format income statement for the most recent year is given below:

	Total	Per unit	Pct. of sales (Ratios)
Sales	$1,200,000	$60	100%
Less variable expenses	900,000	45	?%
	--------	--------	--------
Contribution margin	300,000	15	?%
Less fixed expenses	240,000	======	======
	--------
Net operating income	$60,000
	======

a) What is the Contribution Margin (CM) Ratio (or percent of sales)? (5 points)

b) Calculate break-even point both in total units and total sales dollars. (10 points)

Problem 5: (15 points)

Management is anxious to improve the company's profit performance. Assume that next year management wants the company to earn a minimum profit of $90,000.

How many units will have to be sold to meet the target profit figure?