Question

Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows:

Number of bikes produced and sold		480		760		940
Total costs
Variable costs	$	115,680	$	?	$	?
Fixed costs per year		?		?		?
Total costs		?		?		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?	$	520.75		?
Required: 1. Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.) Number of bikes produced and sold 480 Units 760 Units 940 Units Total costs Variable costs $115,680 Fixed costs per year Total costs $115,680 $0 $0 Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $0.00 $520.75 $0.00

  
2. Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $700. (Round your percentage answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

	480 Units 760 Units 940 Units Contribution Margin Ratio % % % Total Contribution Margin

4. Calculate Hermosa’s break-even point in units and sales revenue. (Round your answers to the nearest whole number.)

	Break-Even Units Bikes Break-Even Sales Revenue

Answer 1

Answer

1.

Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.)

Number of bikes produced and sold 480 Units 760 Units 940 Units Total costs Variable costs(A) $115,680 241*760       =183,160 241*760     =226,540 Fixed costs per year(B)             $212,610 279.75*760 =212,610 $212,610 Total costs(A+B) $328,290 $395,770 $439,150 Cost per unit $351,090/480 =683.94 $395,770/760 =520.75 $439,150/940 =467.18 Variable cost per unit 115680/480      =241 241 241 Fixed cost per unit $212,610/480      =442.94 (520.75-241) =279.75 $212,610/940 =226.18 Total cost per unit $683.94 $520.75 $467.18

2. Calculate Hermosa’s contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company sells each bike for $700. (Round your percentage answers to 2 decimal places. (i.e. .1234 should be entered as 12.34%.))

	480 Units 760 Units 940 Units Contribution Margin Ratio 220320/336000*100 65.57% 348840/532000*100 65.57% 431460/658000*100 65.57% Sales 480*700 =336000 760*700 =532000 940*700 =658000 Less : veriable cost $115,680 $183,160 $226,540 Contibution $220320 $348840 431460

3.

A.Break-Even Units = Fixed cost/Contribution margin per unit

= 212,610/459

=463 units

Contribution margin per unit = 220320/480 =459

B.Break-Even Sales Revenue

= Sales price per unit*Break-Even Units

=700*463

=324,100