Theta Services Co.

Scenario: Service Cost Analysis

Service Line Details:

• Service A:
  • Revenue: $150,000
  • Variable Costs: $50,000
  • Fixed Costs: $30,000

• Service B:
  • Revenue: $120,000
  • Variable Costs: $40,000
  • Fixed Costs: $25,000

Requirements:

1. Contribution Margin Analysis:
   • Calculate the contribution margin and contribution margin ratio for each service line (Service A and Service B) at Theta Services Co. using marginal costing principles.

1. Break-Even Analysis:
   • Perform a break-even analysis to determine the sales revenue needed for Theta Services Co. to break even, considering marginal costing insights.

1. Profitability Comparison:
   • Determine which service line (Service A or Service B) is more profitable based on the contribution margin ratio calculated using marginal costing.

1. Sales Mix Optimization:
   • Recommend a sales mix that maximizes Theta Services Co.'s overall contribution margin, incorporating marginal costing concepts.

1. Cost Reduction Strategies:

Recommend two cost reduction strategies that Theta Services Co. could implement to increase profitability, based on marginal costing analysis.