Asked by la douce Fleur on Jul 24, 2024
Verified
Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600 and has variable costs of $200.?
Required
(a) If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company tobreak even?
(b) How many of these bikes will be Deluxe bikes, and how many will be Standard bikes?
Standard Bikes
Refers to bicycles that adhere to specific industry norms and standards, typically meant for average or typical use scenarios.
Fixed Costs
Costs that do not vary with the level of output or sales over the short term, such as rent or salaries.
Variable Costs
Costs that vary in direct proportion to changes in production or sales volume, such as materials and labor.
- Identify the thresholds at which financial outlays and income converge, in both numerical and monetary metrics, for single-product and multi-product contexts.
- Examine the influence of sales mix on a firm's financial performance and its break-even calculations.
- Use the concepts of fixed and variable costs to ascertain the sales volume needed to meet targeted profit objectives.
Verified Answer
LW
Lashandra williamsJul 29, 2024
Final Answer :
(a) Weighted Average Contribution Margin = {[3 × ($1,800 - $1,200)] + [7 × ($600 - $200)]}/10 = $460Break-Even Point = $1,702,000/$460 = 3,700 bikes
(b) 30% Deluxe = 1,11070% Standard = 2,590
(b) 30% Deluxe = 1,11070% Standard = 2,590
Learning Objectives
- Identify the thresholds at which financial outlays and income converge, in both numerical and monetary metrics, for single-product and multi-product contexts.
- Examine the influence of sales mix on a firm's financial performance and its break-even calculations.
- Use the concepts of fixed and variable costs to ascertain the sales volume needed to meet targeted profit objectives.