Question
Muscle Beach Incorporated makes three models of high-performance weight-training benches. Current operating data are summarized here: MegaMuscle PowerGym ProForce Selling price per unit $ 139
Muscle Beach Incorporated makes three models of high-performance weight-training benches. Current operating data are summarized here: MegaMuscle PowerGym ProForce Selling price per unit $ 139 $ 201 $ 291 Contribution margin per unit 44 78 57 Monthly sales volumeunits 3,060 2,010 1,040 Fixed expenses per month Total of $313,700 Required: Calculate the contribution margin ratio of each product. Calculate the firm's overall contribution margin ratio. Calculate the firm's monthly breakeven point in sales dollars. Calculate the firm's monthly operating income. Management is considering the elimination of the ProForce model due to its low sales volume and low contribution margin ratio. As a result, total fixed expenses can be reduced to $260,950 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income. Would you recommend the elimination of the ProForce model? Assume the same facts as in requirement e-1. Assume also that the sales volume for the PowerGym model will increase by 495 units per month if the ProForce model is eliminated. What would be the effect on operating income. Would you recommend eliminating the ProForce model?
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