Obed Corp., makes three models of high performance cross country ski machines. Current operating data are summarized below: $$\begin{array} { l r r r }
& \text { MySki } & \text { YourSki } & \text { OurSki } \
\text { Selling Price/Unit } & \$ 400 & \$ 500 & \$ 250 \
\text { Variable Cost/Unit } & \$ 100 & \$ 200 & \$ 150 \
\text { Monthly Sales Volume } & 600 & 400 & 500
\end{array}$$ Fixed expenses per month total $185,820
(a) Calculate the contribution margin ratio for each product.
(b) Calculate the firm's overall contribution margin ratio.
(c) Calculate the firm's break-even point in sales dollar.
(d) Calculate the firm's operating income.
(e) Management is considering the elimination of the OurSki model due to low sales volume. As a result, total fixed expenses can be reduced by $60,000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the OurSki model?

Question

Obed Corp., makes three models of high performance cross country ski machines. Current operating data are summarized below: $$\begin{array} { l r r r } 
& \text { MySki } & \text { YourSki } & \text { OurSki } \
\text { Selling Price/Unit } & \$ 400 & \$ 500 & \$ 250 \
\text { Variable Cost/Unit } & \$ 100 & \$ 200 & \$ 150 \
\text { Monthly Sales Volume } & 600 & 400 & 500
\end{array}$$ Fixed expenses per month total $185,820
(a) Calculate the contribution margin ratio for each product.
(b) Calculate the firm's overall contribution margin ratio.
(c) Calculate the firm's break-even point in sales dollar.
(d) Calculate the firm's operating income.
(e) Management is considering the elimination of the OurSki model due to low sales volume. As a result, total fixed expenses can be reduced by $60,000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the OurSki model?

Quizplus · Accepted Answer

The Answer of Obed Corp., makes three models of high performance cross country ski machines. Current operating data are summarized below: $$\begin{array} { l r r r } 
& \text { MySki } & \text { YourSki } & \text { OurSki } \
\text { Selling Price/Unit } & \$ 400 & \$ 500 & \$ 250 \
\text { Variable Cost/Unit } & \$ 100 & \$ 200 & \$ 150 \
\text { Monthly Sales Volume } & 600 & 400 & 500
\end{array}$$ Fixed expenses per month total $185,820
(a) Calculate the contribution margin ratio for each product.
(b) Calculate the firm's overall contribution margin ratio.
(c) Calculate the firm's break-even point in sales dollar.
(d) Calculate the firm's operating income.
(e) Management is considering the elimination of the OurSki model due to low sales volume. As a result, total fixed expenses can be reduced by $60,000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the OurSki model?

Obed Corp, Makes Three Models of High Performance Cross Country Ski