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 price invoice cost sales commission high quality 1850 840 100 medium quality 920 620 40 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore
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 price invoice cost sales commission high quality 1850 840 100 medium quality 920 620 40 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | price invoice cost | sales commission |
| high quality | 1850 | 840 | 100 |
| medium quality | 920 | 620 | 40 |
Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore income taxes.)
a. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.
b. How many bicycles of each type must be sold to earn a target net income of $126,750? Assume a constant sales mix.
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