PDQ Repairs has 200 auto-maintenance service outlets
nationwide. It performs primarily two lines of service: oil changes and brake
repair. Oil change–related services represent 70% of its sales and provide a
contribution margin ratio of 20%. Brake repair represents 30% of its sales and
provides a 40% contribution margin ratio. The company’s fixed costs are
$15,600,000 (that is, $78,000 per service outlet).
Instructions
(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 $52,000 per service outlet. What is the dollar amount
of each type of service that must be performed by each service outlet to meet its
target net income per outlet?
TUTORIAL PREVIEW
a)
Sales Mix Percentage
|
Contribution Margin Ratio
|
Weighted-Average Contribution Margin Ratio
| |
Oil changes
|
70%
|
20%
|
.14
|
Brake repair
|
30%
|
40%
|
.12
|
File name: E6-7 PDQ
Repairs.docx File type: .docx PRICE: $6
