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Master

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Submitted By inevitable5061
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Exercise 5-7 1. The equation method yields the break-even point in unit sales, Q, as follows:

| Profit | = Unit CM × Q − Fixed expenses | | $0 | = ($8 − $6) × Q − $5,500 | | $0 | = ($2) × Q − $5,500 | | $2Q | = $5,500 | | Q | = $5,500 ÷ $2 | | Q | = 2,750 baskets |

Exercise 5-11 | | | | | | | | | | | | | | | | | | | | | | | Pringle Company distributes a single product. The company's sales and expenses for a recent month were | | | | | | | | | | | | | | | | | Total | Per Unit | | | | | | Sales | | | $600,000 | $40 | | | | | | Variable expenses | | 420,000 | $28 | | | | | | Contribution margin | | $180,000 | $12 | | | | | | Fixed expenses | | | 150,000 | | | | | | | Net operating income | | $30,000 | | | | | | | | | | | | | | | | | | | | | | | | | | 1. What is the monthly break-even point in units sold and in sales dollars? | | | | | | | | | | | | | | | | | Sales = TVC + TFC + Operating Profit | | | | | | | | $40(X) = $28(X) + $150,000 +0 | | | | | | | | | $12(X) = $150,000 | | | | | | | | | | X = $150,000/$12 | | | | | | | | | | X = 12,500 | 12,500 | units | $500,000 | Sales dollars | | | | | | | | | | | | | | | 2. Without resorting to computations, what is the total contribution margin at the break-even | | | point? | | | | | | | | | | | | | | | | | | | | | | At the break-even point, the total contribution must be equal to total fixed costs | | | | | | | | | | | | | | 3. How many units would have to be sold each month to earn a target profit of $18,000? | | | | Verify your answer by preparing a contribution format income statement at the target | | | | level of sales. | | |

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