Cost-Volume Profit and Multiple Products: Ken's Bicycle shop
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Ken's Bicycle Shop sells mountain bikes. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:
Product Category Sales Price Invoice Cost Sales Commissions
High quality $700 $375 20% of sales
Medium quality 500 235 20% of sales
The shop anticipates selling 500 bicycles, 300 of which will be medium quality. Annual fixed costs are $80,000. Ignore taxes.
Required
a. What is the shop's sales mix?
b. What is the shop's break-even sales volume in dollars? (Hint: Find the break-even sales volume
first.)
c. How many bicycles of each type must the firm sell to earn a target net income of $50,000?
d. Build your own spreadsheet. Prepare a computer spreadsheet to complete requirements (a)-(c) of this
exercise. What if the market for high quality bikes drops 20 percent and Ken maintains market share?
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Solution Summary
This problem explains how to conduct calculate Cost-Volume Profit when we have Multiple Products. Shows the calculations in step-by-step manner for easy understanding.
Solution Preview
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Ken's Bicycle Shop sells mountain bikes. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows:
Product Category Sales Price Invoice Cost Sales ...
Purchase this Solution
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