Malibu Corporation has monthly fixed costs of $65,000. It sells two products for
ID: 2372297 • Letter: M
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
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)
Combined contribution of one product mix =6*40%+3*60% = $4.20
No of product mix to be sold to reach break even = 65000/4.20 = 15476.19 =15477
Product 1 to be sold = 15477*40% = 6190
Product2 to be sold = 15477*60% =9287
Sales revenue = 6190*10 + 9287*10 = $154,770
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)
Combined contribution of one product mix =6*25%+3*75% = $3.75
No of product mix to be sold to reach target profit = (65000+12000)/3.75 = 20533.33 =20534
Product 1 to be sold = 20534*25% = 5133
Product2 to be sold = 20534*75% =15401
Sales revenue = 5133*10 + 15401*10 = $205,340
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