Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil

Question:

Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change-related services represent 65% of its sales and provide a ratio of 20%. Brake repair represents 35% of its sales and provides a 60% ratio. The company's fixed costs are $16,000,000 (that is, $80,000 per service outlet).

Instructions
(a) Calculate the dollar amount of each type of service that the company must provide in order to break even.
(b) The company has a desired net income of $60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...