Question
Gulf Shore Lawn and Garden Maintenance provides two general outdoor services: lawn maintenance and garden maintenance. The company charges customers $18.0 per hour for
Gulf Shore Lawn and Garden Maintenance provides two general outdoor services: lawn maintenance and garden maintenance. The company charges customers $18.0 per hour for each type of service, but lawn maintenance has higher variable costs ($7.2 per hour) than garden maintenance ($3.6 per hour) because of fuel expenses incurred to operate lawn-mowing equipment. All employees are paid a fixed monthly salary. A contribution format income statement for a recent month for the two services appears below. During the month, 8,000 hours of lawn maintenance services and 2,000 hours of garden maintenance were provided: Lawn Maintenance Per Hour Garden Maintenance Per Hour Sales $144,000 $18.0 $36,000 $18.0 Total $180,000 Variable expenses 57,600 7.2 7,200 3.6 Contribution margin $ 86,400 $10.8 $28,800 $14.4 64,800 115,200 Fixed expenses Operating income 32,256 $ 82,944 Required: 1. Compute the overall CM ratio for the company. Answer is complete and correct. Overall contribution margin ratio 64 % 2. Compute the overall break-even point for the company in sales dollars. Answer is complete and correct. Overall break-even point $ 50,400
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