CVP application-eliminate product from operations? Body Sculpture, Inc.,
makes three models of high-performance weight-training benches. Current operating
data are summarized here:
MegaMuscle PowerGym ProForce
Selling price per unit $ 280 $ 400 $ 580
Contribution margin per unit 84 1 54 1 1 6
Monthly sales volume-units 6,000 4,000 2,000
Fixed expenses per month Total of $1 ,280,000
Required:
a. find out the contribution margin ratio of each product.
b. find out the ? rm's overall contribution margin ratio.
c. find out the ? rm's monthly break-even point in sales dollars.
d. find out the ? rm's monthly operating income.
e. Management is considering the elimination of the ProForce model due to
its low sales volume and low contribution margin ratio. As a result, total
? xed expenses can be reduced to $1,080,000 per month. Assuming that
this change would not affect the other models, would you recommend the
elimination of the ProForce model? describe your answer.
f. Assume the same facts as in part e. Assume also that the sales volume for
the PowerGym model will increase by 1,000 units per month if the ProForce
model is eliminated. Would you recommend eliminating the ProForce
model? describe your answer.