Obed Corp. makes three models of high performance cross country ski machines. Current operating data are summarized below:
Selling price per unit Variable cost per unit Monthly sales volume (units)
Ski1
Ac‚¬ 400 Ac‚¬ 100 600
Ac‚¬ Ac‚¬
Ski2 Ski3
500 Ac‚¬ 250 200 Ac‚¬ 150 400 500
Fixed expenses per month total Ac‚¬ 185.820.
Required:
(a) Calculate the contribution margin ratio for each product
(b) Calculate the firm’s overall contribution margin ratio
(c) Calculate the firm’s break even point in sales euros
(d) Calculate the firm’s operating income
(e) Management is considering the elimination of the Ski3 model due to low sales
volume. As a result, total fixed expenses can be reduced by Ac‚¬60.000 per month. Assuming that this change would not affect the other models, would you recommend the elimination of the Ski3 model ?