Hermosa, Inc., produces one model of mountain bike. Partial information tor the

Question

Hermosa, Inc., produces one model of mountain bike. Partial information tor the company tollows: Number of bikcs produced and sold Total costs 540 840 910 $130,680 Van able costs Fixed costs per year Tolal costs Cost per unit Var able cost per unit Fixed cost per unit Total cost per unit S 523.75 Required: 1. Complete the table. (Round your "Cost per Unit" answers to 2 declmal places.) Number of blkes produced and sold 540 Units 840 Units 910 Units Total costs Variable costs 5 130,630 Fixed costs per year Total costs Cost per unit Variable cast per unit Fixed cost per unit latal cost per unit S 523.75 2. Calulate Hermosa's contribution margin ratio and its total contribution margin at each sales level indicated in the table assuming the company ses each bike for $700.Round your percentage answers to 2 decimal places (Le, .1234 should be entered as 12.34%.)) 540 Units 840 Units 910 Units Conlributicrn Margin Ralio Total Contribution Margin 4. Calculate Hemosa's break-even polnt in unlts and sales revenue. (Round your answers to the nearest whole number.) Break-Even Units Break Even Sales Revenue Dikes

Explanation / Answer

Answer 1) Number of bikes produced and sold 540 840 910 Total Cost Variable cost 130680           203,280           220,220 Fixed cost per year           236,670           236,670           236,670 Total Cost           367,350 439950           456,890 Cost per unit Variable cost per unit             242.00             242.00             242.00 Fixed cost per unit             438.28             281.75             260.08 Total cost per unit             680.28             523.75             502.08 Steps to complete table as below - Variable cost per unit = 130680/540                  242 Variable cost = number of biked produced and sold* 242 Fixed cost using 840 units = total cost per unit * number of unit - variable cost Answer 2) i Number of bikes produced and sold 540 840 910 ii sales per unit 700 700 700 iii Variable cost per unit             242.00             242.00             242.00 iv=ii-iii Contribution per unit             458.00             458.00             458.00 v=iv/ii Contribution margin ratio 65.43% 65.43% 65.43% vi=v*i Total contribution margin           247,320           384,720           416,780 Hence, Contribution margin ratio 65.43% 65.43% 65.43% Total contribution margin $      247,320 $      384,720 $      416,780 Answer 4) Break even point is the point where firm is able to recover its all cost in other word there is no profit and no loss. Break even unit = Fixed cost / Contribution per unit = 236670/458                  517 bikes Break even sales revenue = Fixed cost/Contribution margin % = 236670/65.43% $      361,723

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