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Karera Bicycle shop sells 21-speed bicycles. For purposes of a cost-volume profit analysis, the shop owner divided sales into two-models: Model Sales Price Invoice Cost Sales Commission High-quality P10,000 P5,500 P500 Medium-quality 6,000 2,700 300   Seventy percent of the shop’s sales are medium quality bikes. The shop’s annual fixed expenses are P1,485,000.   a. Compute the weighted average unit contribution margin assuming a constant sales mix. b. What is the shop’s break-even sales volume? c. How many bicycles of each model must be sold to earn a target net income of P990,000?

Karera Bicycle shop sells 21-speed bicycles. For purposes of a cost-volume profit analysis, the shop owner divided sales into two-models: Model Sales Price Invoice Cost Sales Commission High-quality P10,000 P5,500 P500 Medium-quality 6,000 2,700 300   Seventy percent of the shop’s sales are medium quality bikes. The shop’s annual fixed expenses are P1,485,000.   a. Compute the weighted average unit contribution margin assuming a constant sales mix. b. What is the shop’s break-even sales volume? c. How many bicycles of each model must be sold to earn a target net income of P990,000?

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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Karera Bicycle shop sells 21-speed bicycles. For purposes of a cost-volume profit analysis, the shop owner divided sales into two-models:

Model Sales Price Invoice Cost Sales Commission

High-quality P10,000 P5,500 P500

Medium-quality 6,000 2,700 300

 

Seventy percent of the shop’s sales are medium quality bikes. The shop’s annual fixed expenses are P1,485,000.

 

a. Compute the weighted average unit contribution margin assuming a constant sales mix.

b. What is the shop’s break-even sales volume?

c. How many bicycles of each model must be sold to earn a target net income of P990,000?

 

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