Reference no: EM133059157

Question - Ivy Blooms sells wreaths and leis. The following is selected per-unit information for these two products.

Wreaths Leis

Sales price $40 $8

Variable costs and expenses 28 2

Contribution margin $12 $6

Fixed costs and expenses amount to $97,500 per month.

The company generates total sales of $300,000 per month, of which 80 percent result from the sale of wreaths and the other 20 percent from the sale of leis.

Required -

a. Compute separately the contribution margin ratio for each line of products.

b. Assuming the current sales mix, compute:

1. Average contribution margin ratio of total monthly sales.

2. Monthly operating income.

3. The monthly break-even sales volume (stated in dollars).

c. Assume that through aggressive marketing the company is able to shift its sales mix toward more sales of leis. Total sales remain $300,000 per month, but now 40 percent of this revenue stems from sales of leis. Using this new sales mix, compute:

1. Average contribution margin ratio of total monthly sales.

2. Monthly operating income.

3. The monthly break-even sales volume (stated in dollars).