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 $ 500 $ 275 $ 25 Medium-quality 300 135 15 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (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.
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 $ 500 $ 275 $ 25 Medium-quality 300 135 15 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (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.
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