Tom and Lynda operate Hercules Gym. The club currently has 900 individual members and 300 family memberships.

Question:

Tom and Lynda operate Hercules Gym. The club currently has 900 individual members and 300 family memberships. The fee for individual memberships is $100 per month, and families pay $150 per month. Variable costs are $35 per month for individual and $60 per month for a family. Monthly fixed costs amount to $42,750.

Required:

a. Calculate Hercules’ weighted contribution margin. Use this answer to calculate the number of individual and family memberships at breakeven volume

b. Calculate Hercules’ weighted contribution margin ratio. Use this answer to calculate the total revenue to achieve breakeven.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...