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Calculate the break-even point in dollar sales

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Reference no: EM132980180

Question - Mikes Bikes Ltd is a manufacturer of high quality bicycles and has experienced steady growth over the last 5 years. However, due to increased competition has led the company to engage in an aggressive advertising campaign in order to maintain the company's present growth. The following information relates to the current year.

Cost schedules $ Variable costs

Direct labour per bicycle 8.00

Direct materials 4.00

Variable overhead 3.00

Variable cost per bicycle 15.00

Fixed costs

Manufacturing 50 000

Selling 80 000

Administrative 140 000

Total fixed costs 270 000

Selling price per bicycle $50.00

Expected sales, for the 2017 year (40 000 bicycles) $2 000 000

Sales target, for the year 2018 (44 000 bicycles) $2 200 000

Required - Answer the following independent questions and show computations using the contribution margin technique to support your answers. Ignore the effects of any income tax considerations.

a) Calculate the projected operating profit for 2017.

b) Calculate the contribution margin per unit and ratio for 2017.

c) Calculate the break-even point in units for 2017.

d) Calculate the break-even point in dollar sales for 2018 assuming an additional $20,000 selling expense will be spent in order to achieve sales targets for 2018.

Reference no: EM132980180

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