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

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Accounting

Malibu Corporation has monthly fixed costs of $56,000. It sells twoproducts 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 breakeven if the relative sales mix is 30 percent for Product 1 and 70percent for Product 2? (Round your answer to the nearest dollaramount.)
b. What total monthly sales revenue is required to earn amonthly operating income of $16,000 if the relative sales mix is 20percent for Product 1 and 80 percent for Product 2? (Round your answer to the nearest dollaramount.)
a. Break even sales revenue
b. Target sales revenue

Answer & Explanation Solved by verified expert

4.3 Ratings (780 Votes)

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

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In: AccountingMalibu Corporation has monthly fixed costs of $56,000. It sells twoproducts for which it has...Malibu Corporation has monthly fixed costs of $56,000. It sells twoproducts for which it has provided the following information.Sales PriceContributionMarginProduct 1$15$9Product 2204a. What total monthly sales revenue is required to breakeven if the relative sales mix is 30 percent for Product 1 and 70percent for Product 2? (Round your answer to the nearest dollaramount.)b. What total monthly sales revenue is required to earn amonthly operating income of $16,000 if the relative sales mix is 20percent for Product 1 and 80 percent for Product 2? (Round your answer to the nearest dollaramount.)a.Break even sales revenueb.Target sales revenue