Sales Price: $ 500 Costs Frame Seat Tires (each) Rent (monthly) LBCC Bike Shop Cost Details Amount $ $ $ $ 1,500 100 50 10 Manager salary (monthly) Assembly (per bike) Depreciation (monthly) $ 250 1. Can you determine how many bikes you must sell each month in order to break even (net income of $0)? 2. No one runs a business with the goal of only breaking even. How many bikes would you need to sell each month to earn $5,000 net income? 3. Lastly, you are considering a $10,000 advertising campaign that is expected to result in a one-time increase in sales of 50 bikes. Should you do it? Hint: consider fixed versus variable costs. $3,000 $ 40

Sales Price: $ 500 Costs Frame Seat Tires (each) Rent (monthly) LBCC Bike Shop Cost Details Amount $ $ $ $ 1,500 100 50 10 Manager salary (monthly) Assembly (per bike) Depreciation (monthly) $ 250 1. Can you determine how many bikes you must sell each month in order to break even (net income of $0)? 2. No one runs a business with the goal of only breaking even. How many bikes would you need to sell each month to earn $5,000 net income? 3. Lastly, you are considering a $10,000 advertising campaign that is expected to result in a one-time increase in sales of 50 bikes. Should you do it? Hint: consider fixed versus variable costs. $3,000 $ 40

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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Question

Sales Price: $ 500
Costs
Frame
$
$
$
$ 1,500
Manager salary (monthly)
$ 3,000
Assembly (per bike)
$ 40
Depreciation (monthly)
$ 250
1. Can you determine how many bikes you must sell each month in order to break even (net income of $0)?
2. No one runs a business with the goal of only breaking even. How many bikes would you need to sell each month to earn $5,000 net income?
3. Lastly, you are considering a $10,000 advertising campaign that is expected to result in a one-time increase in sales of 50 bikes. Should you do it?
Hint: consider fixed versus variable costs.
Seat
LBCC Bike Shop Cost Details
Tires (each)
Rent (monthly)
Amount
100
50
10

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