Exercise 7-29 Retail; CVP Analysis with Multiple Products (LO 7-1, 7-2, 7-5)

Tims 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	$	1,350		$	590			$	40
Medium-quality		670			370				80

Three-quarters of the shops sales are medium-quality bikes. The shops annual fixed expenses are $158,700. (In the following requirements, ignore income taxes.) Required: 1. Compute the unit contribution margin for each product type. 2. What is the shops sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shops 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 $103,500? Assume a constant sales mix.