Brads Bicycle Shop sells 21-speed bicycles. For purposes of a cost- volume-profit analysis, t he shop owner
Question:
Brad’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost- volume-profit analysis, t he shop owner has divided sales into two categories, as follows:
Seventy percent of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $ 148,500. (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 $ 99,000? Assume a constant salesmix.
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
Step by Step Answer:
Managerial Accounting Creating Value in a Dynamic Business Environment
ISBN: 978-0078025662
10th edition
Authors: Ronald Hilton, David Platt