Lets assume racing bicycle company sells bikes and

Info icon This preview shows pages 58–61. Sign up to view the full content.

View Full Document Right Arrow Icon
Let’s assume Racing Bicycle Company sells bikes and carts and that the sales mix between the two products remains the same.
Image of page 58

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5-59 Sales 250,000 $ 100% 300,000 $ 100% 550,000 $ 100.0% Variable expenses 150,000 60% 135,000 45% 285,000 51.8% Contribution margin 100,000 40.0% 165,000 55% 265,000 48.2% Fixed expenses 170,000 Net operating income 95,000 $ Sales mix 250,000 $ 45% 300,000 $ 55% 550,000 $ 100% Bicycle Carts Total Multi-Product Break-Even Analysis Bikes comprise 45% of RBC’s total sales revenue and the carts comprise the remaining 55%. RBC provides the following information: $265,000 $550,000 = 48.2% (rounded)
Image of page 59
5-60 Multi-Product Break-Even Analysis Fixed expenses CM ratio = Dollar sales to break even Dollar sales to break even $170,000 48.2% = = $352,697 Sales 158,714 $ 100% 193,983 $ 100% 352,697 $ 100.0% Variable expenses 95,228 60% 87,293 45% 182,521 51.8% Contribution margin 63,485 40% 106,691 55% 170,176 48.2% Fixed expenses 170,000 Net operating income Rounding error 176 $ Sales mix 158,714 $ 45% 193,983 $ 55% 352,697 $ 100.0% Bicycle Carts Total
Image of page 60

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
5-61 Key Assumptions of CVP Analysis Selling price is constant. Costs are linear and can be accurately divided into variable (constant per unit) and fixed (constant in total) elements. In multiproduct companies, the sales mix is constant. In manufacturing companies, inventories do not change (units produced = units sold).
Image of page 61
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern