Question
Robust Cycling Limited is a bicycle retailing chain. For the purposes of a cost volume profit analysis, the companys management has divided sales into two
Robust Cycling Limited is a bicycle retailing chain. For the purposes of a cost volume profit analysis, the companys management has divided sales into two categories, as follows: Product type Sales price Cost Sales commission Adult bikes $1000 $550 $50 Child bikes $600 $270 $30 Three quarters of the shops sales are child bikes. The shops annual fixed costs are $130,000. (In the following requirements, ignore income tax.) Required: (a) Calculate the unit contribution margin for each product type. (2 marks) (b) What is the shops sales mix? (2 mark) (c) Calculate the weighted average unit contribution margin, assuming a constant sales mix. (3 marks) (d) What is the shops break-even sales volume in dollars? Assume a constant sales mix. (2 marks) (e) How many bicycles of each type must be sold to earn a target net profit of $97,500? Assume a constant sales mix. (3 marks)
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