Hermosa, Inc., produces one model of mountain bike. Partial information for the
ID: 2540842 • Letter: H
Question
Hermosa, Inc., produces one model of mountain bike. Partial information for the company follows 920 Number of bikes produced and sold Total costs 530 830 $127,200 Variable costs Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $520.75 Requirec 1. Complete the table. (Round your "Cost per Unit" answers to 2 decimal places.) Number of bikes produced and sold 530 Units 830 Units 920 Units Total costs Variable costs 127,200 Fixed costs per year Total costs $ 127,200$ Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit 0.00 $ 520.75 S 0.00Explanation / Answer
Variable costs:
Variable cost per unit will not change with volume of production. Variable cost in total will change with production.
From the given details, at 530 units total variable cost is given of $127,200 hence variable cost per unit will be = 127,200/ 530 = 240 per unit
Fixed costs per year:
Fixed cost in total will not change with production level.
At 830 units total cost per unit given is 520.75
Fixed cost per unit at 830 units will be = total cost per unit - variable cost per unit = 520.75-240 = 280.75
Total fixed costs = 280.75*830 = 233,022.50
Fixed costs in total will remain same for all the given three levels of production.
1
Note: Total variable costs = variable cost per unit * units produced and sold
Fixed costs per unit = Total fixed costs/ units produced and sold
2
Contribution per unit = selling price per unit - variable cost per unit = 730 - 240 = 490
Contribution margin ratio = (selling price per unit - variable cost per unit) / selling price per unit * 100 = (730-240)/730 * 100 = 67.12%
Contribution margin ratio will not change with volume level
Total contribution margin = contribution per unit * sales volume
Below is the table:
4
Break even units = total fixed costs/ contribution per unit = 232022.50 / 490 = 476(rounded off)
Break even sales revenue = break even units * selling price per unit = 476*730 = 347,480
*Please comment if any further explanation is required, your rating is appreciated*
Number of bikes produced and sold 530 830 920 Total costs Variable costs 127,200.00 199,200.00 220,800.00 Fixed costs per year 233,022.50 233,022.50 233,022.50 Total costs 360,222.50 432,222.50 453,822.50 Cost per unit Variable cost per unit 240.00 240.00 240.00 Fixed cost per unit 439.67 280.75 253.29 Total cost per unit 679.67 520.75 493.29