Acc349 Cost Accounting: E6-7 Rapid Auto has over 200 auto-maintenance service outlets nationwide

Acc349 Cost Accounting
Week 3

E6-7
Rapid Auto has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change–related services represent 65% of its sales and provide a contribution margin ratio of 20%. Brake repair represents 35% of its sales and provides a 60% contribution margin ratio. The company’s fixed costs are $16,000,000 (that is, $80,000 per service outlet).

Instructions
(a) Calculate the dollar amount of each type of service that the company must provide in order to break even.
(b) The company has a desired net income of $60,000 per service outlet. What is the dollar amount of each type of service that must be provided by each service outlet to meet its target net income per outlet
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