Question
Steve McQueen is the longtime product manager for Triumph motorcycles. The Triumph Trophy series of bikes has a retail price of $20,000. Triumph dealerships (which
Steve McQueen is the longtime product manager for Triumph motorcycles. The Triumph Trophy series of bikes has a retail price of $20,000. Triumph dealerships (which sell bikes to the end consumer for the retail price) operate independently from the parent company, such that they purchase bikes from Triumph and own the inventory until they sell it to end consumers. Dealership gross margins are 20%. Variable manufacturing costs are $8,600 per bike, while shipping costs, breakage, and insurance amount to $1,000 per bike. Fixed manufacturing costs are $50 million. Regardless of the number of bikes sold, Triumph plans to spend $20 million on advertising and $5 million on the salaries of managers that work directly with the Triumph Trophy series of bikes. How many Trophy series motorcycles will Triumph need to sell to its dealerships to break even?
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