Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provid
ID: 2460048 • Letter: Q
Question
Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change–related services represent 63% of its sales and provide a contribution margin ratio of 23%. Brake repair represents 37% of its sales and provides a 61% contribution margin ratio. The company’s fixed costs are $16,572,000 (that is, $82,860 per service outlet).
Calculate the dollar amount of each type of service that the company must provide in order to break even. (Use Weighted-Average Contribution Margin Ratio rounded to 3 decimal places e.g. 0.255 and round final answers to 0 decimal places, e.g. 2,510.)
Oil changes
$
Brake repair
$
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The company has a desired net income of $59,440 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet? (Use Weighted-Average Contribution Margin Ratio rounded to 3 decimal places e.g. 0.255 and round final answers to 0 decimal places, e.g. 2,510.)
Oil changes
$
Brake repair
$
LINK TO TEXT
Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change–related services represent 63% of its sales and provide a contribution margin ratio of 23%. Brake repair represents 37% of its sales and provides a 61% contribution margin ratio. The company’s fixed costs are $16,572,000 (that is, $82,860 per service outlet).
Explanation / Answer
Solution-
Calculate the dollar amount of each type of service that the company must provide in order to break even
Break-even sales=Fixed Cost/WACM
16,572,000/37.060%
=$44,716,676
(b)
What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet
(fixed costs+target profit)/ Weighted average ContributionMargin
(82,860+59,440)/37.060%
$383,972
Oil changes $63% x $383,972 = $241,902
Brake repair $37% x $383,972 = $142,070
Validation-
Details sales contribution margin ratio WACM Oil change–related service 63% 23% 14.490% Brake repair 37% 61% 22.570% 1 0.84 37.060%Related Questions
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