Mr. Kahlil David has asked that each person conducts analysis on the basis of the following

changes. Reid cycles-Werribee Store expects that salary of store managers as well as rental

contract of its premises would be expected toincrease by mid-2021 by a total amount of

$30,000. This situation will directly affect fixed costs of thestore. It is expected that

budgeted sales volume will decline by 10%, butselling price per bicycle and all variable

costs will remain the same during 2021.

a.Taking into accounting thedecline inprojectedsales volumeand increase in fixed

costs, determine how manybicyclesof eachtypeshould Reid cycles-Werribee Store

produce and sell in order to breakeven in the year 2021.3 Marks

b.Assume that Reid cycles-Werribee Store has the possibility of producing and selling a

total of 14,000 bicycles and that the maximum demand for each type of bicycle could

reach 4,000 for 2021. How should Reid cycles-Werribee Store adjust its budgeted salesquantity per bicycle for 2021 in order to achieve maximum profit by changing its sales

mix?

Provide adequate explanation for your answer.(Hint: you are expected to come

up with proposed sales mix for each product along with your answer.)If demand of

bicyclesisexpected to fall by 10% from 14,000in 2022; what do you advise the

management of Reid Cycles to considerfor the operations ofReid cycles-Werribee

Store beyond 2021? Explain the reason behind your advice. 3 Marks