Biology Forums - Study Force

Back Yard Leisure sells two types of hammocks: Sundance and Shady Lady. The following table shows the sales price and variable cost for each hammock. Back Yard Leisure incurs $600,000 a year in fixed costs. Assume the store has a sales mix of four Sundance for each Shady Lady hammock sold.

Type

Sales Price

Variable Cost

Contribution Margin

Sundance	$125	$50	$  75
Shady Lady	175	75	100

Required:

a.	How many hammocks of each type must be sold for Back Yard Leisure to break

even?

b.	What amount of revenue would be generated by each type of hammock for the

company to earn $75,200 in operating income?

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