Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type Sales Price Invoice Cost Sales CommissionHigh-quality ....................................$500 $275 $25Medium-quality .............................. 300 135 15 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.)Required:1. Compute the unit contribution margin for each product type.2. What is the shop’s sales mix?3. Compute the weighted-average unit contribution margin, assuming a constant sales mix.4. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix.
Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:
Product Type Sales Price Invoice Cost Sales Commission
High-quality ....................................$500 $275 $25
Medium-quality .............................. 300 135 15
Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.)
Required:
1. Compute the unit contribution margin for each product type.
2. What is the shop’s sales mix?
3. Compute the weighted-average unit contribution margin, assuming a constant sales mix.
4. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.
5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 4 images
