Ken’s Bicycle Shop sells mountain bikes. For purposes of a cost-volume-profit Gals the shop owner o 7 Multiple Products has divided sales into two categories, as follows:

co) ) Product Category Sales Price __._ Invoice Cost GA. Sales Commissions = Cm eXcel Zoo Hi3 gh auali: ty Yo gA s $700 $375 es 20% ofsales jHo = \ $4 392 Medium quality 0%) 500 235 20% of sales jo) — | veL mhhe.com/hilton4e Sak shop anticipates selling 500 bicycles, 300 of which will be medium quality. Annual fixed costs are

$80,000. Ignore taxes.

1A HA LH IifK-

0%

[Steet oe: CoC bro Nee Gee es yy0. % : Chapter 12 Financial and Cost-Volume-Profit Models

“= 3 07 2)6;700 MS 426200

a. What is the shop’s sales mi? C a b What is the shop’s break-even sales Re in dollars? (Hint: Find the break-even sales volume first.)

c. How many eon oFe acah must the firm sell to earn a target net income of eee0 00?

d ») E RE’

Required What if fitem arket aC e quality bikes drops 20 percent an@