Racing Wheels Bicycle Shop sells racing bicycles. For the purposes of a cost volume profit analysis ,
Question:
Racing Wheels Bicycle Shop sells racing bicycles. For the purposes of a cost volume profit analysis, the shop owner has divided sales into two categories, as follows
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Three-quarters of the shop's sales are mountain bikes. The shop's annual fixed costs are $390
(In the following requirements, ignore income taxes.)
Required:
1. Calculate the unit contribution margin for each product type
2. What is the shop's sales mix?
3. Calculate 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 profit of $409 500? Assume a constant sales mix
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... Cost Volume Profit Analysis
Cost volume profit analysis also known as CVP analysis is a tool for managers to study cost behavior keeping in view their targets. The CVP analysis allows managers to study cost behavior at different activity levels to predict the target profits...
Step by Step Answer:
1 Bicycle type Sales price Unit variable cost Unit contribution margin Road bikes 2000 ...View the full answer
Management Accounting
ISBN: 9781760421144
7th Edition
Authors: Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton
