Question
Tims Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type
Tims Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:
Product Type | Sales Price | Invoice Cost | Sales Commission | |||||||
High-quality | $ | 1,450 | $ | 640 | $ | 100 | ||||
Medium-quality | 720 | 420 | 90 | |||||||
Three-quarters of the shops sales are medium-quality bikes. The shops annual fixed expenses are $201,000. (In the following requirements, ignore income taxes.) Required: 1. Compute the unit contribution margin for each product type. (High Quality and Medium Quality) 2. What is the shops sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shops break-even sales volume in dollars? Assume a constant sales mix. 5. How many bicycles of each type must be sold to earn a target net income of $100,500? Assume a constant sales mix.
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