Question: Identify and describe or explain the problem that the managers of the organization in question are encountering.What has happened to make the managers realize that the problem has arisen?What is the likely cause of the problem?Why is the problem important?

This is the problem:

"This offer is the greatest thing that's happened to us since we started this business!"

-- Hans "Five-speed" Brinker, founding partner, Brinkers' Bicycle Shop

"Just slow down a minute, Five ... there could be a lot more to this decision than first meets the eye ..."

-- Wilbur Brinker, founding partner, Brinkers' Bicycle Shop

Hans and Wilbur Brinker turned their passion for tinkering with bikes, building customized bicycles, and racing into their own bicycle shop just two years ago.They currently produce:a standard model five-speed bicycle for amateur touring and racing, customized versions of that bicycle for more serious racers, and customized mountain and sand bikes.The standard model has become well known for its value, that is, for its high quality and reasonable price.It now accounts for nearly half of the shop's monthly sales.The following table contains details regarding the standard model's sales, costs and revenues.

Per Total Bicycle per Month Current sales ( bicycles per month ) 25 Sales revenues $300 $7, 500 Variable costs ( direct materials )* $ 100 $2, 500 Contribution margin $200 $5, 000 *Frame parts , brake system , chains , tires , seat , handle bars , pedals , etc . ( labor is treated as a fixed / capacity cost )