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

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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.

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Related Book For  book-img-for-question

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

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