ttps://newconnect.mheducation.com/flow/connect.html Help S Malibu Corporation ha

Question

ttps://newconnect.mheducation.com/flow/connect.html Help S Malibu Corporation has monthly fixed costs of $62.000. t sells two products for which it has provided the folowing information. bution Sales Price $15 $9 2 Product 20 total monthly sales revenue is required to break even if the relative sales mix is 30 percent for Product 1 and 70 percent for a. What Product 2? (Round your answer to the nearest dollar amount.) b. What total monthly sales revenue is required to earn a monthly operating income of $16,000 if the relative sales mix is 20 percent for Product 1 and 80 percent for Product 2? (Round your answer to the nearest dollar amount.) a. CH

Explanation / Answer

a)
Contribution Margin of Product 1 = $ 9
Sales Price of Product 1 = 15
Contribution Margin Ratio of Product 1 = 9/15 = 0.60
Relative Sales Mix of Product 1 = 30%

Contribution Margin of Product 2 = $ 4
Sales Price of Product 2 = 20
Contribution Margin Ratio of Product 2 = 4/20 = 0.20
Relative Sales Mix of Product 2 = 70%

Weighted Average Contribution Margin = (Contribution Margin Ratio of Product 1 * Relative Sales Mix of Product 1) + (Contribution Margin Ratio of Product 2 * Relative Sales Mix of Product 2)
Weighted Average Contribution Margin Ratio = (0.60 * 30%) + (0.20 * 70%)
Weighted Average Contribution Margin Ratio = 0.32

Fixed Cost = 62000

Break Even Sales = Fixed Cost /Weighted Average Contribution Margin Ratio
Break Even Sales = 62000 / 0.32
Break Even Sales = $ 193,750

b)
Contribution Margin of Product 1 = $ 9
Sales Price of Product 1 = 15
Contribution Margin Ratio of Product 1 = 9/15 = 0.60
Relative Sales Mix of Product 1 = 20%

Contribution Margin of Product 2 = $ 4
Sales Price of Product 2 = 20
Contribution Margin Ratio of Product 2 = 4/20 = 0.20
Relative Sales Mix of Product 2 = 80%

Weighted Average Contribution Margin = (Contribution Margin Ratio of Product 1 * Relative Sales Mix of Product 1) + (Contribution Margin Ratio of Product 2 * Relative Sales Mix of Product 2)
Weighted Average Contribution Margin Ratio = (0.60 * 20%) + (0.20 * 80%)
Weighted Average Contribution Margin Ratio = 0.28

Fixed Cost = 62000
Desired Profit = 16000

Target Sales Revenue = (Fixed Cost + Desired Profit) /Weighted Average Contribution Margin Ratio
Target Sales Revenue = (62000+16000) / 0.28
Target Sales Revenue = $ 278,571

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.