A bike manufacturer has fixed costs of $250,000 and variable costs per bike of $55.00. The...

A bike manufacturer has fixed costs of $250,000 and variable costs per bike of $55.00. The bike sells for $150.00 per bike.

A. How many Bikes must be sold to break even?

B.If the fixed cost is increased, would the new breakeven point be higher or lower?

C. If the variable cost per bike decreased, would the new break even point be higher or lower?

Expert Solution

A bike manufacturer has fixed costs of $250,000 and variable costs per bike of $55.00. The bike sells for $150.00 per bike.

Fixed cost = $250,000

Variable cost per bike = $55

The selling price of the bike = $150

A. How many Bikes must be sold to break even?

Breakeven point = Fixed cost / (Selling price per unit – Variable cost per unit) = 250,000/150 – 55 = 250,000/95 = 2631.5789 = 2631.58 units

B. If the fixed cost is increased, would the new breakeven point be higher or lower?

If the fixed cost is increased, and selling price, as well as the variable cost, do not increase, the new breakeven point will be higher. The reason is the value of the numerator increases while the denominator is the same.

C. If the variable cost per bike decreased, would the new break-even point be higher or lower?

If the variable cost per bike decreases, and the selling price, as well as fixed cost, remain the same, the break-even point will be lower. In this case, the variable cost decreases, which means the denominator increases and the numerator is the same as the previous one. So the break-even quantity will be decreased.

Please like the answer if you find the answer helpful. In case of queries, please comment.

keosha answered 4 months ago

A wireless Bluetooth headphone manufacturer has a variable cost are $20 per unit, and fixed costs...

A wireless Bluetooth headphone manufacturer has a variable cost are $20 per unit, and fixed costs are $10,875. The company’s management has developed a price-demand relationship for this wireless headphone, P=-0.25D+250, where P is the product’s unit sales price, and D is the annual demand. 2.1. The breakeven volume for this product is ____________. Show your steps for getting full credit. A) 920 B) 870 C) 790 D) None of these 2.2. Determine the number of wireless headphones the company...

A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs....

A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 104,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?

Your company has fixed costs of $150,000 per year. The variable costs per unit in 2018...

Your company has fixed costs of $150,000 per year. The variable costs per unit in 2018 were $3 per unit, and 30,000 units were produced that year. Your company uses cost-based pricing and has a profit margin of $3 per unit. In 2019, production increased and your team had more experience—variable costs went down to $2 per unit because of your team’s higher skill and 65,000 units were produced that year. What is the change in selling price from 2018...

Alternative A has fixed initial costs of $ X per year and variable costs of $45...

Alternative A has fixed initial costs of $ X per year and variable costs of $45 per unit. Alternative B has fixed costs $20,000 per year and variable costs of $30 per unit. Determine the value of X, if the breakeven quantity is 900. Assume there is no any other cost.

HASF Corporation has fixed costs of 1,000,000 variable costs of50 per units and a contribution...

HASF Corporation has fixed costs of 1,000,000 variable costs of 50 per units and a contribution margin ratio of 40% and no of units sold 20,000 Required: Compute the following Units sales price and unit’s contribution margin for the above...

Assume Phony Company has variable costs per unit of $23, fixed costs of $600,000, and a...

Assume Phony Company has variable costs per unit of $23, fixed costs of $600,000, and a break-even point in units of 60,000 units. If the sales price per unit decreases by $4 and the variable cost per unit decreases by $4, what would happen to the break-even point? A. Break-even point stays the same. B. Break-even point increases. C. Break-even point in dollars decreases. D. Break-even point in dollars decreases and break-even point in units stays the same.

1) Suppose that a company has fixed costs of $15 per unit and variable costs $11...

1) Suppose that a company has fixed costs of $15 per unit and variable costs $11 per unit when 15,500 units are produced. What are the fixed costs per unit when 11,000 units are produced? 2)Total costs for ABC Distributing are $240,000 when the activity level is 9,000 units. If variable costs are $3.0 per unit, what are their fixed costs? 3)Park and West, LLC, provides consulting services to retail merchandisers in the Midwest. In 2019, they generated $750,000 in...

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B...

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. The crossover point between process A and process B is 50 units. Suppose the forcast demand for next year is 100 units, according to question 1) , process B will be better. True or False?

A rotational molding operation has fixed costs of $7,000 per year and variable costs of $47...

A rotational molding operation has fixed costs of $7,000 per year and variable costs of $47 per unit. If the process is automated via conveyor, its fixed cost will be $49,000 per year, but its variable cost will be only $10 per unit. Determine the number of units each year necessary for the two operations to break even.

A rotational molding operation has fixed costs of $6,000 per year and variable costs of $45...

A rotational molding operation has fixed costs of $6,000 per year and variable costs of $45 per unit. If the process is automated via conveyor, its fixed cost will be $43,000 per year, but its variable cost will be only $10 per unit. Determine the number of units each year necessary for the two operations to break even. The number of units each year necessary for the two operations to break even is determined to be .

Question