Obed CorpMakes Three Models of High Performance Cross Country Ski Machines

question 6

Essay

Obed Corp.makes three models of high performance cross country ski machines.Current operating data are summarized below:
$\begin{array}{lccc}&\text { MySki } & \text { YourSki } &\text { OurSki }\\ \text { Selling Price/Unit } & \$ 400 & \$ 500 & \$ 250 \\\text { Variable Cost/Unit } & \$ 100 & \$ 200 & \$ 150 \\\text { Monthly Sales Volume } & 600 & 400 & 500\end{array}$
Fixed expenses per month total $185,820.
(a)Calculate the contribution margin ratio for each product.
(b)Calculate the firm's overall contribution margin ratio.
(c)Calculate the firm's breakeven point in sales dollar.
(d)Calculate the firm's operating income.
(e)Management is considering the elimination of the OurSki model due to low sales volume.As a result, total fixed expenses can be reduced by $60,000 per month.Assuming that this change would not affect the other models, would you recommend the elimination of the OurSki model?

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Definitions:

Market Segments

Divisions within a market that are identified by specific needs and characteristics, allowing for targeted marketing strategies.

Profit

The money left after a for-profit organization subtracts its total expenses from its total revenues and is the reward for the risk it undertakes in marketing its offerings.

ROI

Return on Investment, a financial metric used to measure the efficiency and profitability of an investment.

Demographic Segmentation

The segmentation of a market into different groups according to factors like age, gender, income, occupation, and education levels.