Obed Corp, Makes Three Models of High Performance Cross Country Ski

question 48

Essay

Obed Corp., makes three models of high performance cross country ski machines. Current operating data are summarized below: $$\begin{array} { l r r r } & \text { MySki } & \text { YourSki } & \text { OurSki } \\\text { Selling Price/Unit } & \$ 400 & \$ 500 & \$ 250 \\\text { Variable Cost/Unit } & \$ 100 & \$ 200 & \$ 150 \\\text { Monthly Sales Volume } & 600 & 400 & 500\end{array}$$ 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 break-even 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:

Business Leaders

Individuals who are in charge of guiding and making strategic decisions for organizations or companies.

Dangerous

Involving potential harm or risk to safety, health, or well-being.

Deceptive Advertising

Marketing practices that mislead or falsely represent products or services to consumers, potentially leading to uninformed or harmful purchasing decisions.

Puffery

The act of making exaggerated, subjective claims about a product or service that cannot be objectively verified, often used in advertising.