Malibu Corporation has monthly fixed costs of $56,000. It sells two products for which it has...

Malibu Corporation has monthly fixed costs of $56,000. 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.)


a.	Break even sales revenue
b.	Target sales revenue

Expert Solution

a) Calculation of break even sales revenue:
Break even sales revenue= Fixed cost/ contribution margin ratio

Contribution margin ratio= contribution/sales*100
Contribution margin ratio of product 1= 9/15*100=60%
Contribution margin ratio of product 2= 4/20*100=20%

Total contribution margin= 600.30+200.70
=18+14= 32%

Break even sales revenue= 56000/0.32= $175000
Break even sales revenue= $175000

b) Calculation of target sales revenue:
Target sales revenue= (fixed cost+operating income)/contribution margin ratio

Contribution margin ratio of product 1= 9/15*100=60%
Contribution margin ratio of product 2= 4/20*100=20%

Contributio margin ratio= 600.20+200.80
= 12+16=28%

Target sales revenue= (56000+16000)/0.28
= 72000/0.28=257142.86

Target sales revenue= $257143

ekkarill92 answered 2 years ago

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