Malibu Corporation has monthly fixed costs of $66,000. It sells two products for

Question

Malibu Corporation has monthly fixed costs of $66,000. It sells two products for which it has provided the following information. Sales Price Contribution Margin Product 1 $ 15 $ 9 Product 2 20 4 a. 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.) b. 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.)

Explanation / Answer

1. Total monthly sales revenue required to break even if the relative sales mix is 30 percent for Product 1 and 70 percent for Product 2 is as calculated below:

2. 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

Product 1 Product 2 Sales 15 20 Contribution Margin   9 4 Contribution Margin ratio 60% 20% Relative sales Mix 30% 70% Total contribution Margin 18% 14% 32% Fixed Costs 66,000 Break even sales (Fixed Costs/ Contribution Margin ratio) 206,250

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