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.

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? 4. 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?

Part 3 (A) 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

Break-even point in unit sales = 11,250

Break-even point in dollar sales= $450,000

Part 3 (B) the company is able to reduce its variable expenses by $4 per unit. What dollar sales is required to attain a target profit of $60,000

unit sales required to attain a target profit = 15,000

dollar sales required to attain a target profit = $ 600,000

Explanation:

Part 1 Break-even point in unit sales and in dollar sales

Break-even point in unit sales = Fixed Costs/ Contribution per unit

= $180,000 / $40× 30%

= 15,000

Break-even point in dollar sales = Fixed Costs / Contribution Margin Ratio

= $180,000/0.30

= $ 600,000

Part 2 What amount of unit sales and dollar sales is required to attain a target profit of $60,000 per year

unit sales required to attain a target profit = (Fixed Costs + Target Profit)/Contribution per unit

=($180,000+$60,000)/($40× 30%)

= 20,000

dollar sales required to attain a target profit = unit sales required to attain a target profit × Selling Price per Unit

= 20,000 × $40.00

= $ 800,000

Part 3 (A) 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

Break-even point in unit sales = Fixed Costs/ Contribution per unit

= $180,000 / ($40-(($40× 70%) - $4))

= $180,000/ $16

= 11,250

Break-even point in dollar sales = Fixed Costs / Contribution Margin Ratio

= $180,000/ ($16/$40)

= $180,000/ 0.40

= $450,000

Part 3 (B) the company is able to reduce its variable expenses by $4 per unit. What dollar sales is required to attain a target profit of $60,000

unit sales required to attain a target profit = (Fixed Costs + Target Profit)/Contribution per unit

=($180,000+$60,000)/$16

= 15,000

dollar sales required to attain a target profit = unit sales required to attain a target profit × Selling Price per Unit

= 15,000 × $40.00

= $ 600,000