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Royal Bikes (RB) manufactures and sells two models of bike, Ezee and Focus. Of RB's sales, 60% are for EZee and 40% for Focus. RB incurs $918,000 fixed costs, and pays taxes at a rate of 40%.Sheldon Wright, the owner of RB, anticipates that the labour and material costs will increase next year. He is considering upgrading the existing machine, which will cost $72,000. However, the variable costs will reduce from $500 to $400 for Ezee and from $900 to $800 for Focus.
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