Altitude Cycles Ltd is a small manufacturer of mountain bikes. The bikes sell for $750 each. The variable costs of each unit include the following:
In addition, $180,000 of fixed overhead is incurred annually. Selling and administrative expenses are fixed costs totalling $140,000 and $100,000, respectively.
Assume all the bikes that are manufactured are sold.
Instructions:
(a) Assuming Altitude Cycles uses absorption costing, compute the unit cost for one bike.
(b) Assuming Altitude Cycles uses variable costing, compute the unit cost for one bike.
(c) Compute the required sales in units necessary to achieve a target profit of $210,000.
(d) Compute the margin of safety ratio for Altitude Cycles assuming actual sales of $1,125,000.

Question

Altitude Cycles Ltd is a small manufacturer of mountain bikes. The bikes sell for $750 each. The variable costs of each unit include the following:
  In addition, $180,000 of fixed overhead is incurred annually. Selling and administrative expenses are fixed costs totalling $140,000 and $100,000, respectively.
Assume all the bikes that are manufactured are sold.
Instructions:
(a) Assuming Altitude Cycles uses absorption costing, compute the unit cost for one bike.
(b) Assuming Altitude Cycles uses variable costing, compute the unit cost for one bike.
(c) Compute the required sales in units necessary to achieve a target profit of $210,000.
(d) Compute the margin of safety ratio for Altitude Cycles assuming actual sales of $1,125,000.

Quizplus · Accepted Answer

The Answer of Altitude Cycles Ltd is a small manufacturer of mountain bikes. The bikes sell for $750 each. The variable costs of each unit include the following:
  In addition, $180,000 of fixed overhead is incurred annually. Selling and administrative expenses are fixed costs totalling $140,000 and $100,000, respectively.
Assume all the bikes that are manufactured are sold.
Instructions:
(a) Assuming Altitude Cycles uses absorption costing, compute the unit cost for one bike.
(b) Assuming Altitude Cycles uses variable costing, compute the unit cost for one bike.
(c) Compute the required sales in units necessary to achieve a target profit of $210,000.
(d) Compute the margin of safety ratio for Altitude Cycles assuming actual sales of $1,125,000.

Altitude Cycles Ltd Is a Small Manufacturer of Mountain Bikes