Tandem Bikes manufactures exercise bicycles built for two. It sells a cycle for $196(custom painted in your color choice). The costs associated with Tandem's productionare:Fixed costs (per year)Administrative labor $50000Variable Costs per bikeMaterials$30Mfg. LaborAssembly laborPacking materialPacking laborShipping costТОTALUtilities500024Plant Overhead65000$12000083ТOTALNote: this is $10000 per month.10$771. Find the monthly breakeven quantity using the above data.2. Express monthly breakevendollar sales (using the quantity calculated in #1).3. The cost of utilities doubles (annual fixed costs are now $125000 which is$10416.67 per month). What is the new monthly breakeven quantity?4. What is the Contribution Margin Ratio (CMR), using the costs used in #3?5. You believe you can sell only 80 bikes a month. Using the costs from #3, whatprice must be charged per bike to break even selling only 80 bikes per month?6. Using the original selling price of $196 and costs used in #3, compute a DOL fora 100 unit monthly level of production.

Given: The selling price of the cycle: $196 Total variable cost=$77 Total fixed cost=$120,000

Tandem Bikes manufactures exercise bicycles built for two. It sells a cycle for $196 (custom painted in your color choice). The costs associated with Tandem's production are: Fixed costs (per year) Administrative labor $50000 Variable Costs per bike $30 Materials Utilities 5000 Mfg. Labor Assembly labor Packing material Packing labor Shipping cost TОTAL 24 Plant Overhead ТOTAL 65000 $120000 8 3 2 Note: this is $10000 per month. 10 $77 1. Find the monthly breakeven quantity using the above data. 2. Express monthly breakeven in dollar sales (using the quantity calculated in #1). 3. The cost of utilities doubles (annual fixed costs are now $125000 which is $10416.67 per month). What is the new monthly breakeven quantity? 4. What is the Contribution Margin Ratio (CMR), using the costs used in #3? 5. You believe you can sell only 80 bikes a month. Using the costs from #3, what price must be charged per bike to break even selling only 80 bikes per month? 6. Using the original selling price of $196 and costs used in #3, compute a DOL for a 100 unit monthly level of production.

Tandem Bikes manufactures exercise bicycles built for two. It sells a cycle for $196 (custom painted in your color choice). The costs associated with Tandem's production are: Fixed costs (per year) Administrative labor $50000 Variable Costs per bike $30 Materials Utilities 5000 Mfg. Labor Assembly labor Packing material Packing labor Shipping cost TОTAL 24 Plant Overhead ТOTAL 65000 $120000 8 3 2 Note: this is $10000 per month. 10 $77 1. Find the monthly breakeven quantity using the above data. 2. Express monthly breakeven in dollar sales (using the quantity calculated in #1). 3. The cost of utilities doubles (annual fixed costs are now $125000 which is $10416.67 per month). What is the new monthly breakeven quantity? 4. What is the Contribution Margin Ratio (CMR), using the costs used in #3? 5. You believe you can sell only 80 bikes a month. Using the costs from #3, what price must be charged per bike to break even selling only 80 bikes per month? 6. Using the original selling price of $196 and costs used in #3, compute a DOL for a 100 unit monthly level of production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

Tandem Bikes manufactures exercise bicycles built for two. It sells a cycle for $196
(custom painted in your color choice). The costs associated with Tandem's production
are:
Fixed costs (per year)
Administrative labor $50000
Variable Costs per bike
Materials
$30
Mfg. Labor
Assembly labor
Packing material
Packing labor
Shipping cost
ТОTAL
Utilities
5000
24
Plant Overhead
65000
$120000
8
3
ТOTAL
Note: this is $10000 per month.
10
$77
1. Find the monthly breakeven quantity using the above data.
2. Express monthly breakeven
dollar sales (using the quantity calculated in #1).
3. The cost of utilities doubles (annual fixed costs are now $125000 which is
$10416.67 per month). What is the new monthly breakeven quantity?
4. What is the Contribution Margin Ratio (CMR), using the costs used in #3?
5. You believe you can sell only 80 bikes a month. Using the costs from #3, what
price must be charged per bike to break even selling only 80 bikes per month?
6. Using the original selling price of $196 and costs used in #3, compute a DOL for
a 100 unit monthly level of production.

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