Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides two main lines of service: oil
Question:
Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides two main lines of service: oil changes and brake repair. Oil changes and related services represent 70% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 30% of its sales and provides a 60% contribution margin ratio. The company's fixed costs are $16 million (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 operating income of $60,000 per service outlet. Calculate the dollar amount of each type of service that must be provided by each service outlet to meet the company's target operating income per outlet.
Step by Step Answer:
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly