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:

Procedures

Established methods or sequences of actions for accomplishing a task or solving a problem.

Policies

Guidelines or principles that govern the operations and decision-making processes within an organization.

Organizational Pressure

The internal or external forces that influence the behaviors, performance, and strategies of an organization.

Complacency Trap

The mistake of being carried along by the flow of events.