Question

Olongapo Sports Corporation distributes two premium golf balls: Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow. Fixed expenses total $55,000.

Calculate:

A) The total monthly sales revenue for each product.
B) The contribution margin for each product.
C) The company's break-even sales volume for each product.
D) The company's profit (or loss) after accounting for the fixed expenses.

Answer 1

To calculate the total monthly sales revenue, contribution margin, break-even sales volume, and profit, we use the provided sales data and formulas.
The total monthly sales revenue for Flight Dynamic is $30,000 and for Sure Shot is $44,000.
The contribution margin for Flight Dynamic is $2 per unit and for Sure Shot is $3.50 per unit.

Step-by-step explanation:

To calculate the total monthly sales revenue for each product, we multiply the monthly sales volume by the selling price. For Flight Dynamic, the total sales revenue is $30,000 (10,000 units x $3), and for Sure Shot, the total sales revenue is $44,000 (8,000 units x $5.50).

To calculate the contribution margin for each product, we subtract the variable cost per unit from the selling price per unit. The contribution margin for Flight Dynamic is $2 per unit, and for Sure Shot, it is $3.50 per unit.

The break-even sales volume for each product can be calculated using the formula: Break-even sales volume = Fixed expenses / Contribution margin ratio. For Flight Dynamic, the break-even sales volume is 27,500 units, and for Sure Shot, it is 15,714 units.

To calculate the company's profit (or loss) after accounting for the fixed expenses, we subtract the total fixed expenses from the total contribution margin. The company's profit after accounting for the fixed expenses is $80,000.