Illustrate what is shop sales mix

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Reference no: EM1370916

Q. Ken's Bicycle Shop sells mountain bikes. For purposes of a cost-volume-profit analysis, 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

shop anticipates selling 500 bicycles, 300 of which will be medium quality. Annual fixed costs are $80,000. Ignore taxes.

Required

a. Illustrate what is shop's sales mix?

b. Illustrate what is shop's break-even sales volume in dollars? (Hint: Find break-even sales volume first.)

c. Explain how many bicycles of each type must 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. Illustrate what if market for high quality bikes drops 20 percent and Ken maintains market share?

Reference no: EM1370916

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