Reid Cycles is founded by James Reid that began operations in 2009; with the sole intention of

providing Australia's best value bikes. The firm does this by cutting out the middle men

and selling high quality bikes direct to the public. Designed by Australians for

Australians; Reid creates trends by combining fashion, function and quality. From

humble beginnings in 2009, selling Reid bikes from the garage of James Reid, the firm

now has an online web-store and retail stores in 5 major cities in Australia. In 2013, the

firm sold its first bike internationally to its Switzerland distributor. To this day Reid

bikes are ridden by over 400,000 Australians. Today, Reid bikes are available in more

than 20 countries around the world. Bicycle sales have drastically increased during the

COVID-19 pandemic period as lock-down measures were put in place and many

workplaces moved to online and others shut down. Staying and working from home has

motivated people to engage in daily exercise either by walking or cycling. Given the

opportunity, Reid has considered various options to expand its market share. The

proposal to open a new store in Werribee is part of this expansion plan. The project

indicates that the initial phase will focus on securing a store, hiring retail workers and

start by introducing two types of bicycles: Road Bikes (Express and Osprey Flatbar) and

Mountain Bikes (MTB Sport Disc and MTB Sport). Reid has a plan to open the store in

January 2021.

The proposed budgeted sales volume for 2021 includes 320 Express bikes, 400 Osprey

Flatbar bikes, 380 MTB Sport Disc bikes and 500 MTB Sport bikes. Budgeted annual

fixed manufacturing costs are $109,005 and fixed selling and administrative costs are

$58,695. The income tax rate applicable for the business is 30 per cent. Additional

budgeted per unit data for the four types of bicycles is presented below. please check.

conduct 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 to increase by

mid-2021 by a total amount of $30,000. This situation will directly affect fixed costs of the store. It is

expected that budgeted sales volume will decline by 10%, but selling price per bicycle and all variable costs will remain the same during 2021.

a. Taking into accounting the decline in projected sales volume and increase in fixed

costs, determine how many bicycles of each type should Reid cycles-Werribee Store

produce and sell in order to break-even in the year 2021.

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 sales

quantity 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

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

management of Reid Cycles to consider for the operations of Reid cycles-Werribee

Store beyond 2021? Explain the reason behind your advice.

Express Osprey MTB MTB Flatbar Sport Disc Sport Sales Price 5500 5600 5370 5300 Variable cost - manufacturing 260 280 175 140 selling & admin. 90 120 75 62