Smith Dawn Ltd. (SDL) manufactures bicycles and sells them to retail stores acrossCanada. SDL manufactures three different models. The models are distinguished by thequality of materials used and the sophistication of the design. The bikes vary in price; theBasic model is the most basic and cheapest, the Classic is a mid-price-point product, andthe Excel is the most expensive model.Quality control is critical for SDL, The company prides itself on not just meeting butexceeding the minimum requirements. Industry surveys have shown that quality is the mostimportant factor for customers. SDL also has a strong reputation for excellent customerservice and timely delivery.It is January 31, 20X1, and you, CPA, work for a consulting firm. The controller of SDL asksyou to help her with a number of items in preparation for an upcoming board of directorsmeeting. She informs you that sales have grown to the point where SDL is now operating atcapacity and struggling to meet demand.Issue 1The controller provides you with the following statement of income by product line for theyear ended December 31, 20X0. The average selling prices were $300, $460, and $650 forthe Basic, Classic, and Excel models, respectively.