Question

PDQ Repairs has 200 auto-maintenance service outlets nationwide. It performs primarily two lines of service: oil changes and brake repair. Oil change–related services represent 60% of its sales and provide a contribution margin ratio of 25%. Brake repair represents 40% of its sales and provides a 45% contribution margin ratio. The company’s fixed costs are $15,590,000 (that is, $77,950 per service outlet).

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

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 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

Oil changes		$enter a dollar amount rounded to 0 decimal places
Brake repair		$enter a dollar amount rounded to 0 decimal places

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New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

The company has a desired net income of $50,000 per service outlet. What is the dollar amount of each type of service that must be performed by each service outlet to meet its target net income per outlet? (Use Weighted-Average Contribution Margin Ratio rounded to 2 decimal places e.g. 0.25 and round final answers to 0 decimal places, e.g. 2,510.)

Oil changes		$enter a dollar amount rounded to 0 decimal places
Brake repair		$enter a dollar amount rounded to 0 decimal places

Answer 1

Calculation of Weighted Average Contribution Margin
Service	% of Sales	Individual PV ratio	Contribution (%) (Sales * PV)
Oil Change	60	25%	15
Brake Repair	40	45%	18
Weighted Average Contribution Margin	33
Calculation of Break Even Sales
Break Even Sales	=	Fixed Cost / PV Ratio
Company's Fixed Cost		15590000.00
Weighted Average Contribution Margin	33%
Break Even Sales	=	(15590000/0.33)
Break Even Sales (Total)	=	47242424
Break Even Sales - Service Break Up
Service	% of Sales	Sales (R/off)
Oil Change	60	28345455
Brake Repair	40	18896969
Total Sales	47242424 (R/off)
Break even Sales with Desired Profit	=	(Fixed Cost + Desired Profit) / PV Ratio
Company's Fixed Cost		15590000.00
Weighted Average Contribution Margin	33%
Desired Profit		10000000.00	(Profit Per Outlet = 50000 * No. of Outlet = 200)
Break Even Sales	=	(15590000 + 10000000)/0.33
Break Even Sales (Total)		77545454.55
Break Even Sales - Service Break Up
Service	% of Sales	Sales (R/off)
Oil Change	60	46527272
Brake Repair	40	31018182
Total Sales	77545454 (R/off)