Maurice Tutor

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    Argosy University/ Phoniex University/
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    Oct-2001 - Nov-2016

Category > Accounting Posted 15 Aug 2017 My Price 12.00

Muscle Beach, Inc.

CVP application—eliminate product from operations? Muscle Beach, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here:

 

 

 

 

Selling price per unit

MegaMuscle

$  170

PowerGym

$   220

ProForce

$   310

Contribution margin per unit

51

77

62

Monthly sales volume—units

4,000

3,000

1,000

Fixed expenses per month

 

Total of $468,000

 

 

 

 

 

 

 

Required:

a.       Calculate the contribution margin ratio of each product.

b.      Calculate the firm’s overall contribution margin ratio.

c.       Calculate the firm’s monthly break-even point in sales dollars.

d.      Calculate the firm’s monthly operating income.

e.       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 $420,000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the ProForce model? Explain your answer.

f.        Assume the same facts as in part e. Assume also that the sales volume for the PowerGym model will increase by 500 units per month if the ProForce model is eliminated. Would you recommend eliminating the ProForce model? Explain your answer.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 15 Aug 2017 11:08 AM My Price 12.00

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