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:

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.

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

(c) Assuming that the products are sold in a 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.

(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).

Transcribed Image Text:

T C R Selling price Units $1,600 $1,800 $1,400 420 400 380 The standard cost card for each product is shown below. T C R ($) ($) ($) Material 430 500 360 Labour 220 240 190 Variable overheads 110 120 95