Reference no: EM132607529
Fitness First Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year are as follows:
T C R
Selling price RM 1,600 RM 1,800 RM 1,400
Units 420 400 380
The standard cost card for each product is shown below.
T C R
RM RM RM
Material 430 500 360
Labor 220 240 190
Variable overheads 110 120 95
Labor costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labor costs are expected to be $55,000 for the next year.
Question 1: Calculate the weighted average contribution to sales ratio for Fitness First Co using the formula of Total Contribution/Total Sales Revenue for the three products.
Question 2: Calculate the margin of safety in RM revenue for Fitness First Co.
Question 3: Using a graph paper and assuming that the products are sold in a CONSTANT MIX, draw a multi-product break even chart for Fitness First Co. Label fully both axes, any lines drawn on the graph and the break even point.
Question 4: Explain what would happen to the break even point if the products were sold in order of the most profitable products first.