Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change-related services represent 63% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 37% of its sales and provides a 60% contribution margin ratio. The company's fixed costs are $15,890,700 (that is, $79,454 per service outlet).
Calculate the dollar amount of each type of service that the company must provide in order to break even.
A)Oil Change =
B)Break Repair =
The company has a desired net income of $59,766 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet?
1. Breakeven even revenues = Fixed cost/contribution margin ratio
When there are two products we calculate the weighted average contribution margin ratio
Weighted average contribution ...
The solution explains how to calculate the price for breakeven and to generate a desired income