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Question: tims bicycle shop sells 21speed bicycles for purposes of a...

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Tim’s 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 $ 2,000 $ 1,050 $ 110
Medium-quality 1,100 770 40

Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $239,400. (In the following requirements, ignore income taxes.)

Required:

  1. Compute the unit contribution margin for each product type.

  2. What is the shop’s sales mix?

  3. Compute the weighted-average unit contribution margin, assuming a constant sales mix.

  4. What is the shop’s 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 $128,250? Assume a constant sales mix.

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