Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provid
ID: 2498386 • 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 64% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 36% of its sales and provides a 59% contribution margin ratio. The company’s fixed costs are $16,230,000 (that is, $81,150 per service outlet).
(a) 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.)
(b) The company has a desired net income of $61,212 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.)
$
Brake repair$
Explanation / Answer
Statement showing computations Particulars Oil Change Break Repair Total Sales in % 64% 36% 100% Contribution Margin in % 20% 59% Contribution as % of total sales 12.80% 21.24% 34.04% AT BEP Fixed Costs = Contribution 16,230,000 = 34.04% of sales Sales = 16,230,000/34.04% Sales = 47,679,201 Sales for each type 30,514,688.60 17,164,512.34 47,679,200.94 Desired Net income per outlet = 61,212 Desired Net income for 200 outlet = 61,212*200 Desired Net income for 200 outlet = 12,242,400 Fixed Costs + Income = Contribution 16,230,000 + 12,242,400 = 34.04%of sales 28,472,400 = 34.04%of sales Sales = $83,643,948.30 Sales per Outlet = 83,643,948.30/200 Sales per Outlet = 418,219.74 Sales For each service 267,660.63 150,559.11 418,219.74
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