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

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.)

Solutions

Expert Solution

Calculation of Contribution margin ratio
S.No	Particulars	Product 1	Product 2
(a)	Selling Price	15	20
(b)	Contribution margin	9	4
(c )	Contribution margin ratio [[(b)/(c )]*100]	60%	20%

Answer to part 1
Particulars	Product 1	Product 2	Total
Contribution Margin ratio	60%	20%
Relative sales mix	30%	70%
Contribution margin ratio*Realtive sales mix	18%	14%	32%
Calculation of monthly sales revenue required to break even
Fixed costs			66000
Total Contribution margin ratio*Realtive sales mix			32%
Monthly sales revenue required to break even (66000/32%)			206250

Answer to part 2
Particulars	Product 1	Product 2	Total
Contribution Margin ratio	60%	20%
Relative sales mix	20%	80%
Contribution margin ratio*Realtive sales mix	12%	16%	28%
Calculation of monthly sales revenue required to earn a monthly operating Income of $ 16000.
Fixed costs			66000
Target Income			16000
Total Contribution margin ratio*Realtive sales mix			28%
Monthly sales revenue required to break even (66000+16000/28%)			292857

ekkarill92 answered 1 year ago

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