1.Suppose that Magik Bicycles wants to produce a new mountain bike called Magik bike III and has forecast the following information.

Price per bike$800

Variable cost per bike$300

Fixed costs related to bike production$5,500,000

Target profit$200,000

Estimated sales12,000 bikes

Required:

i.Find the total contribution margin.

ii.Find the breakeven quantity and revenue by using equation method.

iii.Find the breakeven quantity and revenue by using contribution margin method.

iv.Find the breakeven quantity and revenue by using graphic method.

v.Compute the margin of safety in units and in dollar and explain the result.

vi.Calculate the degree of operating leverage and explain the result.

vii.How many magik bikes should magic bicycles sell to reach target operating income of $200,000?

viii.Suppose that Magik Bicycles plans for an after-tax profit of $180,000 and its tax rate is 40%. How many magik bikes should magic bicycles sell to reach the target net income?

Answer rating: 100% (QA)

Answer To solve this problem we need to use the given information and apply the relevant concepts of costvolumeprofit CVP analysis i Total Contributio... View the full answer