Answer:
(a) The answer is Sales of Oil change–related services is $42,000,000 while Sales of rake repair services is $18,000,000
(b) The answer is Sales of oil change services per an outlet = $350,000; Sales of brake repairs services per an outlet = $150,000
Explanation:
Denote x is the total Sales of PDQ Repairs
=> 0.7x is the sales of Oil change–related services while 0.3x is the Brake repair services.
=> 0.7x * 20% = 0.14x is the contribution of Oil change–related services while 0.3x * 40% = 0.12x is the contribution of Brake repair services.
(a)
To reach break-event point, total contribution must equal to total fixed costs:
=> 0.14x + 0.12x = 15,600,000 <=> 0.26x = 15,600,000 <=> x = 60,000,000
Thus, Sales of Oil change–related services is $42,000,000 while Sales of rake repair services is $18,000,000
(b)
The total desired net income = desired income by one outlet x number of outlets = 52,000 x 200 = $10,400,000
To reach total desired net income, total contribution must cover all the fixed cost and generate the level of profit meeting desire:
=> 0.14x + 0.12x = 15,600,000 + 10,400,000 <=> 0.26x = 26,000,000 <=> x = 100,000,000
=> Total sales of oil change services = $70,000,000; Total sales of brake repairs services = $30,000,000.
=> Sales of oil change services per an outlet = $350,000; Sales of brake repairs services per an outlet = $150,000 ( as there are 200 outlet).
