Reference no: EM132607529

Fitness First 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:

                          T                    C                    R

Selling price       RM 1,600      RM 1,800   RM 1,400

Units                  420                   400        380

The standard cost card for each product is shown below.

                               T                 C                   R

                                      RM              RM                 RM

Material                     430             500          360

Labor                         220              240        190

Variable overheads         110              120         95

Labor costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labor costs are expected to be $55,000 for the next year.

REQUIRED:

Question 1: Calculate the weighted average contribution to sales ratio for Fitness First Co using the formula of Total Contribution/Total Sales Revenue for the three products.

Question 2: Calculate the margin of safety in RM revenue for Fitness First Co.

Question 3: Using a graph paper and assuming that the products are sold in a CONSTANT MIX, draw a multi-product break even chart for Fitness First Co. Label fully both axes, any lines drawn on the graph and the break even point.

Question 4: Explain what would happen to the break even point if the products were sold in order of the most profitable products first.