Clank Bicycles is a bicycle retailer that sells road bikes and mountain bikes. Mountain bikes accounts for 60% of the store’s total sales volume. The selling price and variable cost per unit are as follows: Road bike Mountain bike Selling price 4,700 3,400 Product cost 3,080 2,600 Sales commission 60 40 Annual fixed costs are $113,400. Ignore tax effects and assume a constant sales mix. Required: Calculate the break-even point in units and dollars. Calculate how many bicycles of each type needed to be sold to earn a target net profit of $340,200? Hint: Same formula as a single product, but divided by ‘weighted average unit contribution margin’ instead of ‘unit contribution margin’.
Clank Bicycles is a bicycle retailer that sells road bikes and mountain bikes. Mountain bikes accounts for 60% of the store’s total sales volume. The selling price and variable cost per unit are as follows: Road bike Mountain bike Selling price 4,700 3,400 Product cost 3,080 2,600 Sales commission 60 40 Annual fixed costs are $113,400. Ignore tax effects and assume a constant sales mix. Required: Calculate the break-even point in units and dollars. Calculate how many bicycles of each type needed to be sold to earn a target net profit of $340,200? Hint: Same formula as a single product, but divided by ‘weighted average unit contribution margin’ instead of ‘unit contribution margin’.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Clank Bicycles is a bicycle retailer that sells road bikes and mountain bikes. Mountain bikes accounts for 60% of the store’s total sales volume. The selling price and variable cost per unit are as follows:
|
|
Road bike |
Mountain bike |
|
Selling price |
4,700 |
3,400 |
|
Product cost |
3,080 |
2,600 |
|
Sales commission |
60 |
40 |
Annual fixed costs are $113,400. Ignore tax effects and assume a constant sales mix.
Required:
- Calculate the break-even point in units and dollars.
- Calculate how many bicycles of each type needed to be sold to earn a target net profit of $340,200?
Hint: Same formula as a single product, but divided by ‘weighted average unit contribution margin’ instead of ‘unit contribution margin’.
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