Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600 and has variable costs of $200.
Required:
A. If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company to break even?
B. How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?
Answer
Weighted average contribution margin
= (3 x ($1,800 - $1,200) + 7 x ($600 - $200)) / 10 = $460
Break even point = $1,702,000/460 = 3,700 bikes
30% Deluxe = 1,110
70% Standard = 2,590

Question

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The Answer of Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600 and has variable costs of $200.
Required:
A. If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company to break even?
B. How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?
Answer
Weighted average contribution margin
= (3 x ($1,800 - $1,200) + 7 x ($600 - $200)) / 10 = $460
Break even point = $1,702,000/460 = 3,700 bikes
30% Deluxe = 1,110
70% Standard = 2,590