Qwik Repairs 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 65% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 35% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are $16,000,000 (that is $80,000 per service outlet).
Instruction:
(a) Calculate the dollar amount of each type of service that the company must provide in order to break even.
(b) The company has a desired net income of $60,000 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?