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Current operating income for Bay Area Cycles Company is $26,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $104,000. Required: 1. Calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? 2. How many additional unit sales would be necessary to achieve operating income of $65,000? Complete this question by entering your answers in the tabs below. Required 1 Required 2 How many additional unit sales would be necessary to achieve operating income of $65,000? Additional unit sales units

Current operating income for Bay Area Cycles Company is $26,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $104,000. Required: 1. Calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? 2. How many additional unit sales would be necessary to achieve operating income of $65,000? Complete this question by entering your answers in the tabs below. Required 1 Required 2 How many additional unit sales would be necessary to achieve operating income of $65,000? Additional unit sales units

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Bay Area Cycles Company Financial Analysis Assignment #### Background Information: - **Current operating income**: $26,000. - **Selling price per unit**: $100. - **Contribution margin ratio**: 25%. - **Fixed expenses**: $104,000. #### Required Calculations: 1. **Per unit variable expense and contribution margin**: - Calculate Bay Area Cycles' per unit variable expense. - Determine the contribution margin in dollars per unit. - Ascertain the number of units currently being sold. 2. **Achieving a new operating income target**: - Calculate the number of additional unit sales required to achieve an operating income of $65,000. #### Instructions: Complete this question by entering your answers in the tabs below. 1. **Required 1**: - Calculate the per unit variable expense and contribution margin. - Determine the number of units currently being sold based on current figures. 2. **Required 2**: - Calculate the required additional unit sales needed to achieve the target operating income of $65,000. #### Input Fields: - **How many additional unit sales would be necessary to achieve an operating income of $65,000?** - Additional unit sales: __ units Submit your answers by clicking on the "Required 1" or "Required 2" buttons. This exercise will help you understand the importance of contribution margins and fixed expenses in determining the operating income of a company.
Transcribed Image Text:### Bay Area Cycles Company Financial Analysis Assignment #### Background Information: - **Current operating income**: $26,000. - **Selling price per unit**: $100. - **Contribution margin ratio**: 25%. - **Fixed expenses**: $104,000. #### Required Calculations: 1. **Per unit variable expense and contribution margin**: - Calculate Bay Area Cycles' per unit variable expense. - Determine the contribution margin in dollars per unit. - Ascertain the number of units currently being sold. 2. **Achieving a new operating income target**: - Calculate the number of additional unit sales required to achieve an operating income of $65,000. #### Instructions: Complete this question by entering your answers in the tabs below. 1. **Required 1**: - Calculate the per unit variable expense and contribution margin. - Determine the number of units currently being sold based on current figures. 2. **Required 2**: - Calculate the required additional unit sales needed to achieve the target operating income of $65,000. #### Input Fields: - **How many additional unit sales would be necessary to achieve an operating income of $65,000?** - Additional unit sales: __ units Submit your answers by clicking on the "Required 1" or "Required 2" buttons. This exercise will help you understand the importance of contribution margins and fixed expenses in determining the operating income of a company.
### Bay Area Cycles Financial Analysis #### Current Operating Income Bay Area Cycles currently has an operating income of $26,000. The selling price per unit is $100, the contribution margin ratio is 25%, and the fixed expenses are $104,000. #### Required Analysis - **Calculate Bay Area Cycles’ per unit variable expense and contribution margin. Additionally, determine the current number of units being sold.** - **Determine the number of additional unit sales needed to achieve an operating income of $65,000.** #### Problem Breakdown - **Required 1**: Calculation of the per unit variable expense and contribution margin, as well as the current number of units being sold. - **Required 2**: Calculation of the number of additional units needed to achieve a specified operating income. ### Required 1 **Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold?** #### Table Breakdown: | Per Unit | Volume | Total | Ratio | |----------|--------|-------|-------| | Revenue | $100 | | 100% | | Variable Expense | | | | | Contribution Margin | | | 25% | | Fixed Expense | | | | | Operating Income | | | | - **Revenue per Unit**: $100 - **Variable expense**: To be calculated - **Contribution margin ratio**: 25% - **Fixed expense**: $104,000 - **Operating income**: $26,000 #### To calculate: - **Contribution Margin (CM)** per unit: \[ CM = Selling Price \times Contribution Margin Ratio \] \[ CM = 100 \times 0.25 = \$25 \] - **Variable Expense** per unit: \[ VE = Selling Price - Contribution Margin \] \[ VE = 100 - 25 = \$75 \] - **Number of Units Sold**: \[ Total CM = Fixed Expenses + Operating Income \] \[ Total CM = 104,000 + 26,000 = \$130,000 \] \[ Units Sold = \frac{Total CM}{CM per unit} \] \[ Units Sold = \frac{130,000}{25} = 5,200 \] ### Required 2 #### Calculate the additional unit sales necessary to achieve an operating income of $65,000. -
Transcribed Image Text:### Bay Area Cycles Financial Analysis #### Current Operating Income Bay Area Cycles currently has an operating income of $26,000. The selling price per unit is $100, the contribution margin ratio is 25%, and the fixed expenses are $104,000. #### Required Analysis - **Calculate Bay Area Cycles’ per unit variable expense and contribution margin. Additionally, determine the current number of units being sold.** - **Determine the number of additional unit sales needed to achieve an operating income of $65,000.** #### Problem Breakdown - **Required 1**: Calculation of the per unit variable expense and contribution margin, as well as the current number of units being sold. - **Required 2**: Calculation of the number of additional units needed to achieve a specified operating income. ### Required 1 **Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold?** #### Table Breakdown: | Per Unit | Volume | Total | Ratio | |----------|--------|-------|-------| | Revenue | $100 | | 100% | | Variable Expense | | | | | Contribution Margin | | | 25% | | Fixed Expense | | | | | Operating Income | | | | - **Revenue per Unit**: $100 - **Variable expense**: To be calculated - **Contribution margin ratio**: 25% - **Fixed expense**: $104,000 - **Operating income**: $26,000 #### To calculate: - **Contribution Margin (CM)** per unit: \[ CM = Selling Price \times Contribution Margin Ratio \] \[ CM = 100 \times 0.25 = \$25 \] - **Variable Expense** per unit: \[ VE = Selling Price - Contribution Margin \] \[ VE = 100 - 25 = \$75 \] - **Number of Units Sold**: \[ Total CM = Fixed Expenses + Operating Income \] \[ Total CM = 104,000 + 26,000 = \$130,000 \] \[ Units Sold = \frac{Total CM}{CM per unit} \] \[ Units Sold = \frac{130,000}{25} = 5,200 \] ### Required 2 #### Calculate the additional unit sales necessary to achieve an operating income of $65,000. -
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