5. Wonder Company manufactures and sells three distinct styles of bicycles: the

Question

5. Wonder Company manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in sales dollars.

Explanation / Answer

Contribution Sales Mix C*Mix Youth Model 105 5 525 Adult model 450 9 4050 Recreational Model 500 6 3000 Total 7575 Selling Price Sales Mix SP*Mix Youth Model 300 5 1500 Adult model 850 9 7650 Recreational Model 1000 6 6000 15150 Contribution margin ratio 7575/15150 50% Break Even Dollares 6500000/50% 13000000

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