Malibu Corporation has monthly fixed costs of $65,000. It sells two products for

Question

Malibu Corporation has monthly fixed costs of $65,000. It sells two products for which it has provided the following information:


Sales Price Contribution Margin
Product 1 $ 10 $ 6
Product 2 $ 10 $ 3

a. What total monthly sales revenue is required to break even if the relative sales mix is 40 percent for Product 1 and 60 percent for Product 2? (Round your answer to the nearest dollar amount. Omit the "$" sign in your response)

Sales revenue $

b. What total monthly sales revenue is required to earn a monthly operating income of $12,000 if the relative sales mix is 25 percent for Product 1 and 75 percent for Product 2? (Round your answer to the nearest dollar amount. Omit the "$" sign in your response)

Sales revenue $

Explanation / Answer

I answered this same question earlier from another user. See below: a.) Use algebra: We also need to find variable costs which are Sales - Contribution Margin. This will be expressed in the equation below. To break even, we need to set the equation equal to $0. "x" will represent the number of units sold, which is what we will need to find to back in to our revenue figure. [($10 x .4) + ($10 x .6)]x - [(.4 x ($10-$6)) + (.6 x ($10-$3))]x - $60,000 = $0 [$4 + $6]x - [$1.60 + $4.20]x - $60,000 = $0 $10x - $5.80x - $60,000 = $0 $4.20x = $60,000 X = 14,285.7 units Plug that back into the revenue mix equation: Answer = .4(14,285.7x$10) + .6(14,285.7x$10) = $142,857 That was a bit complicated, but it should work. b.) Now, we need to the same thing as above with some minor changes. The sales mix is different and we are looking to turn a profit of $12,000. Again, "x" will represent the number of units sold. [(.25 x $10) + (.75 x $10)]x - [(.25 x ($10-$6)) + (.75 x ($10 - $3))]x - $60,000 = $12,000 [$2.50 + $7.50]x - [$1 + $5.25]x - $60,000 = $12,000 $10x - $6.25x - $60,000 = $12,000 $3.75x = $72,000 x = 19,200 units Plug that into the revenue mix equation: Answer = .25($10 x 19,200) + .75($10 x 19,200) = $192,000

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

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