Malibu Corporation has monthly fixed costs of $69,000. It sells two products for
ID: 2454745 • Letter: M
Question
Malibu Corporation has monthly fixed costs of $69,000. It sells two products for which it has provided the following information:
What total monthly sales revenue is required to break even if the relative sales mix is 30 percent for Product 1 and 70 percent for Product 2? (Round your answer to the nearest dollar amount.)
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.)
Sales Price Contribution Margin Product 1 $15 $9 Product 2 20 4
Explanation / Answer
a) Let Total Sales Revenue be x Statement showing computations Particulars Product 1 Product 2 Sales Price 15.00 20.00 Contribution Margin 9.00 4.00 PV Ratio = Cont/ Sales*100 60.0% 20.0% Sales Mix .30x .70x Contribution at sales mix .18x .14x At Break even fixed Costs will be equal to total Contribution .32x = 69,000 x= 69,000/.32 x= 215625 Break even sales Revenue = 215,625 b) Let Total Sales Revenue be x Statement showing computations Particulars Product 1 Product 2 Sales Price 15.00 20.00 Contribution Margin 9.00 4.00 PV Ratio = Cont/ Sales*100 60.0% 20.0% Sales Mix .20x .80x Contribution at sales mix .12x .16x Cont = Fc + Profit= 69,000+16,000 = 85,000 .28x = 85,000 x= 85,000/.28 x= $303,571.43
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