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:

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

  
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%.))

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

     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

Explanation / Answer

Answer

1.

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

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%.))

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

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

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