Question: Muscle Beach, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here:
|
MegaMuscle
|
PowerGym
|
ProForce
|
|
Selling price per unit
|
$
|
143
|
|
$
|
196
|
|
$
|
295
|
|
|
Contribution margin per unit
|
|
38
|
|
|
76
|
|
|
56
|
|
|
Monthly sales volumeâ€"units
|
|
2,960
|
|
|
1,930
|
|
|
1,060
|
|
|
Fixed expenses per month
|
|
|
Total of $314,000
|
|
|
a. Calculate the contribution margin ratio of each product. (Round your answers to 1 decimal place.)
b. Calculate the firm's overall contribution margin ratio. (Round your answer to 1 decimal place.)
c. Calculate the firm's monthly break-even point in sales dollars. (Round your intermediate calculations to 1 decimal place.)
d. Calculate the firm's monthly operating income.
e-1. Management is considering the elimination of the ProForce model due to its low sales volume and low contribution margin ratio. As a result, total fixed expenses can be reduced to $261,710 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income.
e-2. Would you recommend the elimination of the ProForce model?
f-1. Assume the same facts as in requirement e-1. Assume also that the sales volume for the PowerGym model will increase by 503 units per month if the ProForce model is eliminated. What would be the effect on operating income.
f-2. Would you recommend eliminating the ProForce model?
Yes
No