Chapter 4 Sports To Go is organized into three departments. The following sales

Question

Chapter 4 Sports To Go is organized into three departments. The following sales and cost data are available for the prior year: Field Water $ 200,000 $ 124,000 $ 176,000 $ $ 135,000 $ 82,000 $99,000 $ $ 65,000 $ 42,000 $ 77,000 $ $ 39,000 $ 16,000 $ 32,000 $ $ 26,000 $ 26,000 $ 45,000 $ Foot Total Sales Less variable costs Contribution margirn Less fixed costs Profit 500,000 316,000 184,000 87,000 97,000 Part A Determine the Contribution Margin Ratio for each of the three departments to three decimal places Water Foot Field Part B What is the weighted average contribution margin ratic for Sports To Go? In order to earn a profit of $160,000 for the upcoming year and assuming the current ratios and fixed costs are a reasonable estimate of the next year, what should Sports To Go's target total revenue be? You may ignore income taxes Part C

Explanation / Answer

Part A: Contirbution margin for 3 departments

Water = 65000/200000*100 = 32.5%

Foot = 42000/124000*100 = 33.87%

Field = 77000/176000*100= 43.75%

Part B: Weighted average contibution margin = 32.5+33.87+43.75/3 = 36.707%

Part C: Profit reqd = $1,60,000

Fixed costs = $87,000

Hence, contribution requied = $2,47,000

Weighted average contribution amrgin = 36.8%

Hence, sales required = 247000/36.8*100 = $6,71,195

Looking forward foryour upvote

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