Muscle Beach, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here: MegaMusclePowerGymProForceSelling price per unit$141 $194 $281 Contribution margin per unit 42 76 57 Monthly sales volume—units 3,030 2,010 1,080 Fixed expenses per month Total of $315,600 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-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 $263,850 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income. f-1. Assume the same facts as in requirement e-1. Assume also that the sales volume for the PowerGym model will increase by 492 units per month if the ProForce model is eliminated. What would be the effect on operating income.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Muscle Beach, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here:
MegaMusclePowerGymProForceSelling price per unit$141 $194 $281 Contribution margin per unit 42 76 57 Monthly sales volume—units 3,030 2,010 1,080 Fixed expenses per month Total of $315,600
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-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 $263,850 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income.
f-1. Assume the same facts as in requirement e-1. Assume also that the sales volume for the PowerGym model will increase by 492 units per month if the ProForce model is eliminated. What would be the effect on operating income.
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