Question

Malibu Corporation has monthly fixed costs of $58,000. It sells two products for which it has provided the following information. Contribution Margin Product 1 Product 2 Sales Price $15 20 $9 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 22 (Round your answer to the nearest dollar amount.) a. Break even sales revenue b. Target sales revenue

Answer 1

Answer
a
	Product 1	Product 2	Total
Contribution margin (A)	$9	$4
Sales Price (B)	$15	$20
Contribution margin Ratio C= A/B	60%	20%
Sales Mix ( D )	30%	70%
Weighted Average CM Ratio E=( C*D )	18%	14%	32%
Fixed Cost ( F)			$58,000
Total Monthly Sales revenue required to Break Even    (G= F/E)			$181,250

b
	Product 1	Product 2	Total
Contribution margin	$9	$4
Sales Price	$15	$20
CM Ratio	60%	20%
Sales Mix	20%	80%
Weighted Average CM Ratio	12%	16%	28%
Fixed Cost			$58,000
Operating Income required			$16,000
Total Contribution margin required			$74,000
Total Monthly Sales revenue required to earn target operating income			$264,286