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Negotiate with suppliers to bring his variable costs down

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Reference no: EM131103126

Start with a blank Excel worksheet.

Mountain Cycle makes custom mountain bikes. PJ, the owner of Mountain Cycle would like to know what he must do in the next year to break even.

The owner has estimated the following:

His annual fixed costs (rent, utilities, etc) are $65000

His variable cost per bike (raw materials, shipping, etc) is $1575

Question 1: If he sets the price of the mountain bike at $2500, how many bikes must he sell to break even? (rounded to the nearest integer number)

Question 2: If he estimates demand for next year to be 120 bikes, what price should he set per bike to break even?

Question 3: PJ thinks he can sell 130 bikes next year if he lowers the price of each bike to $2000. His fixed costs cannot be brought down, but he thinks he can negotiate with suppliers to bring his variable costs down. In order to break even, what does his new variable cost per bike have to be?

Use the Goal Seek function of Excel to arrive at your answers.

Reference no: EM131103126

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