SHU Bicycle Shop sells Mountain bikes, Dirt bikes and Leisure bikes. D. Shim, owner, aggregated the...

SHU Bicycle Shop sells Mountain bikes, Dirt bikes and Leisure bikes. D. Shim, owner, aggregated the following information with help of SHU Accounting Consulting Group:

Product	sales price	purchase cost
Mountain bike	$1,500	$900
Dirt Bike	$1,800	$800
Leisure Bike	$800	$600

The shop anticipates selling 600 Mountain bikes, 250 Dirt bikes and 150 Leisure bikes. Monthly common fixed costs which can’t be separated to any product are $1,000,000 and income tax rate is 40%.

Required)

1. What is unit contribution margin and sales mix for Mountain bike, Dirt bike and Leisure bike?

2. Prepare current contribution margin income statement using above information.

3. What is shop’s breakeven sales volume in units and in dollars for each product and total products?

4. How many bicycles of each type must be sold to earn $920,000 before taxes?

5. How many bicycles of each type must be sold to earn after tax income of $1,000,000?

Expert Solution

Solution:

ekkarill92 answered 2 years ago

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