1.Suppose that Magik Bicycles wants to produce a new mountain bike called Magik bike III and has...
Question:
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?
Cost Management Measuring Monitoring and Motivating Performance
ISBN: 978-0470769423
2nd edition
Authors: Leslie G. Eldenburg, Susan K. Wolcott