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

Question

Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows: Number of bikes produced and sold Total costs 450 780 970 Variable costs Fixed costs per year $103,500 Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 512.75 Required: 1. Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.) Number of bikes produced and sold 450 Units 780 Units 970 Units Total costs Variable costs $ 103,500 Fixed costs per year Total costs $ 103,500$ Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit 0.00$ 512.75 $ 0.00

Explanation / Answer

1 Number of bikes produced and sold Working 450 Working 780 Working 970 Total costs: Total variable cost 103500 780*230 179400 970*230 223100 Total fixed costs 149370 780*191.5 149370 149370 Total costs 103500+149370 252870 179400+149370 328770 221300+149370 372470 Cost per unit: Variable cost per unit 103500/450 230.00 179400/780 230.00 221300/970 230.00 Fixed cost per unit 149370/450 331.93 512.75-230 191.50 149370/970 153.99 total cost per unit 252870/450 561.93 328770/780 512.75 372470/970 383.99 Total Fixed cost always remains same irrespective of number of units. 2) Calculation of unit contribution margin and contribution margin ratio Particulars Amount Selling price per unit 800 Less:Variable cost per unit 230 Unit Contribution margin(800-230) 570 Contribution margin ratio= unit contribution margin/ selling price per unit*100                                                    = 570/800*100=71.25% 450 units: Cotribution margin ratio= 71.25% Total contribution margin=450*570=$256500 780 units: Cotribution margin ratio= 71.25% Total contribution margin=780*570=$444600 970 units: Cotribution margin ratio= 71.25% Total contribution margin=970*570=$552900 4) Calculation of break even point: Break even point in units=Fixed cost/unit contribution margin                                                        =149370/570=262 Break even point in units=262 bikes Break even point in dollars sales= fixed cost/ contribution margin ratio                                                                  =149370/0.7125=$209642

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