MegaMuscle

PowerGym

ProForce

  Selling price per unit

$

149

$

208

$

294

  Contribution margin per unit

41

75

56

  Monthly sales volume—units

2,990

2,080

950

  Fixed expenses per month

Total of $317,900

a.

Calculate the contribution margin ratio of each product. (Round your answers to 1 decimal place.)

b.

Calculate the firm's overall contribution margin ratio. (Round your answer to 1 decimal place.)

c.

Calculate the firm's monthly break-even point in sales dollars. (Round your intermediate calculations to 1 decimal place and final answer to the nearest whole dollar.)

d.

Calculate the firm's monthly operating income.

e.1

Management is considering the elimination of the ProForce model due to its low sales volume and low contribution margin ratio. As a result, total fixed expenses can be reduced to $272,070 per month. Assuming that this change would not affect the other models, what would be the effect on net operating income.

e.2

Would you recommend elimination of the ProForce model?

f.1

Assume the same facts as in requirement 5. Assume also that the sales volume for the PowerGym model will increase by 509 units per month if the ProForce model is eliminated. What would be the effect on operating income.

f.2

Would you recommend eliminating the ProForce model?