Problem 12-26 CVP application-eliminate product from operations? LO 8, 9, 10, 11

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

	MegaMuscle			PowerGym			ProForce
Selling price per unit	$	141		$	195		$	283
Contribution margin per unit		43			76			59
Monthly sales volumeunits		2,960			1,950			920
Fixed expenses per month			Total of $329,700

e.1

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 $281,750 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income.

f.1	Assume the same facts as in requirement 5. Assume also that the sales volume for the PowerGym model will increase by 507 units per month if the ProForce model is eliminated. What would be the effect on operating income.