UA Products sells running shoes and shorts. The following is selected per-unit information for these two products.

Shoes Shorts

Sales $50 $5

Variable Costs and Expenses $35 $1

Fixed costs and expenses amount to $378,000 per month.

UA has total sales of $1 million per month, of which 80 percent result from the sale of running shoes and the other 20 percent from the sale of shorts.

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 UA is able to shift its sales mix toward more sales of shorts. Total sales remain $1 million per month, but now 30 percent of this revenue stems from sales of shorts. 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).