P12-20 CVP application-eliminate product from operations? [LO 8, 9, 10, 11]

Body Sculpture, Inc., makes three models of high-performance weight-training benches. Current operating data are summarized here:

	MegaMuscle			PowerGym			ProForce
Selling price per unit	$	135		$	198		$	293
Contribution margin per unit		44			78			57
Monthly sales volume%u2014units		2,980			2,060			920
Fixed expenses per month			Total of $ 324,800

Requirement 1:

Calculate the contribution margin ratio of each product. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)

	MegaMuscle		PowerGym		ProForce
Contribution margin ratio		%		%		%

Requirement 2:

Calculate the firm's overall contribution margin ratio. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

Over all CM ratio

%

Requirement 3:

Calculate the firm's monthly break-even point in sales dollars. (Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)

Break even point

$

Requirement 4:

Calculate the firm's monthly operating income(loss). (Negative amount should be indicated by a minus sign. Omit the "$" sign in your response.)

Operating income(loss)

$

Requirement 5:
(a)	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 $279,560 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income. (Input the amount as positive value. Omit the "$" sign in your response.)

Net operating income will (Click to select) increase by decrease by

$

(b)	Would you recommend elimination of the ProForce model?
	(Click to select) Yes No

Requirement 6:
(a)	Assume the same facts as in requirement 5. Assume also that the sales volume for the PowerGym model will increase by 492 units per month if the ProForce model is eliminated. What would be the effect on operating income. (Omit the "$" sign in your response.)

Net operating income will (Click to select) decrease by increase by

$

(b)	Would you recommend eliminating the ProForce model?
	(Click to select) Yes No