Musclo Beach, Inc., makes three modols of high-performance woight training bench
ID: 2513091 • Letter: M
Question
Musclo Beach, Inc., makes three modols of high-performance woight training benches. Current operating data are summarized here MegaMuscle PowerGym ProForce Soling price per unit Contibution margin per unit Monthly sales volume S 198 $281 5e 41 76 2.970 30 910 Fixed expenses per month Total of $322,600 a. Caloulate the contibuion margin ratio of each product. (Round your answers to 1 decimal place.) b. Calculate the firm's overal contribution margin ratio. (Round your answor to 1 decimal placo) ratio. (Round your s. Caloulate the firm's monthly break-even point in sales dolars. (Round your intermed ate calculations to 1 decimal place. a dollars. (Round your culations to t d. Calculate the firm's monthly operating income. o $275.080 per month. Assuming that this change would not affect the other modols, what would bo the offect on e-1. Managoment is considering the elimination of the ProForce modol due to its low sales volume and low contribution margin ratio. As a rosult, total fixed expenses can bo reduced to $275080 per m net operaing income e-2. Would you recommend the elimination of the ProForce model? Yes No f-1. Assume the same facts as in requirement e-1.Assume also that the sales volume for the PowerGym model will inarease by 506 units per month if the ProFcrce model is eiminated. What would be the affiect on operating incomeExplanation / Answer
b) Total Contribution /Total Sales = 3,26,000/1056620= 0.3
c)Firms Monthly Breakeven sales value =
Firms Fixed Expenses per month / Firms overall Contribution ratio=
$322,600/0.3= $1,075,333
d) Firms Monthly Operating Income ($)
Firms Total Contribution value less Firms Fixed Expenses=
326,000 - 322,600= 3,400
e-1) The effect of eliminating Proforce model will result in reduction of the monthly Operating Income. THis line generates a contribution per month of $53,690. This would completely disappear while the drop in fixed costs would only be $47,520. The Operating Income would be reduced by $6170
e-2) No, for the above reason, I would not recommend this decision.
f-1) If the sales of PowerGym goes up by 506 units, the contribution would go up by $39,468. Therefore, even with a reduction of all contributions from Proforce, this increase would INCREASE the Operating income of the firm by the same amount
PARTICULARS MEGAMUSCLE POWERGYM PROFORCE Sales Price Per Unit ($) 141 198 281 contribution Per Unit 41 78 59 Sales Volume (units) 2970 1930 910 Fixed Expenses Per Month 322600 a) Contrbution Margin ratio of each Product ( Contribution/Sales) 0.3 0.04 0.2Related Questions
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