Multi-product CVP analysis Cardio Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year are as follows:

The standard cost card for each product is shown below.

Labour costs are 60 per cent fixed and 40 per cent variable. General fixed overheads excluding any fixed labour costs are expected to be $55 000 for the next year.
Required:

(a) Calculate the weighted average contribution to sales ratio for Cardio Co.
(4 marks)

(b) Calculate the margin of safety in $ revenue for Cardio Co. (3 marks)

(c) Using the graph paper provided and assuming that the products are sold ina CONSTANT MIX, draw a multi-product break even chart for Cardio Co. Label fully both axes, any lines drawn,on the graph and the break even point.
(6 marks)

(d) Explain what would happen to the break even point if the products were sold in order of the most profitable products first.
Note: You are NOT required to demonstrate this on the graph drawn in part (c).
(2 marks)
ACCA F5 Performance Management

Transcribed Image Text:

T C R Selling price Units $1600 $1800 $1400 420 400 380