Cardio 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:
Labour costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labour costs are expected to be $55,000 for the next year.
Required:
(a) Calculate the weighted average contribution to sales ratio for Cardio Co. (4 marks)
(b) Calculate the margin of safety in $ revenue for Cardio Co. (3 marks)
(c) Using the graph paper provided and assuming that the products are sold in a CONSTANT MIX, draw a multi-product breakeven chart for Cardio Co. Label fully both axes, any lines drawn on the graph and the breakeven point. (6 marks)
(d) Explain what would happen to the breakeven point if the products were sold in order of the most profitable products first.
Note: You are NOT required to demonstrate this on the graph drawn in part (c). (2 marks)