Exercise $7-29$

Retail; CVP Analysis with Multiple Products

$($LO$7-1,7-2,7-5)$

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:

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:

Compute the unit contribution margin for each product type.

What is the shop's sales mix?

Compute the weighted$-$average unit contribution margin, assuming a constant sales mix.

What is the shop's break$-$even sales volume in dollars? Assume a constant sales mix.

How many bicycles of each type must be sold to earn a target net income of $$48,750?$

Assume a constant sales mix.