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Ivy Blooms sells wreaths and leis. The following is selected per-unit information for these two products. Sales price Variable costs and expenses Contribution margin Wreaths
Ivy Blooms sells wreaths and leis. The following is selected per-unit information for these two products. Sales price Variable costs and expenses Contribution margin Wreaths $ 40 28 $ 12 Leis $ 8 2 $ 6 Fixed costs and expenses amount to $97,500 per month. The company generates total sales of $300,000 per month, of which 80 percent result from the sale of wreaths and the other 20 percent from the sale of leis. Required: a. Compute separately the contribution margin ratio for each line of products. b. Assuming the current sales mix, compute: 1. Average contribution margin ratio of total monthly sales. 2. Monthly operating income. 3. The monthly break-even sales volume (stated in dollars). c. Assume that through aggressive marketing the company is able to shift its sales mix toward more sales of leis. Total sales remain $300,000 per month, but now 40 percent of this revenue stems from sales of leis. Using this new sales mix, compute: 1. Average contribution margin ratio of total monthly sales. 2. Monthly operating income. 3. The monthly break-even sales volume (stated in dollars). % % % a. Contribution Margin Ratio for Wreaths Contribution Margin Ratio for Leis b-1. Average contribution margin ratio b-2. Operating income b-3. Break even dollars sales volume c-1. Average contribution margin ratio C-2. Operating income c-3. Break even dollars sales volume %
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