Current operating income for Bay Area Cycles Co. is $52,000. Selling price per u

Question

Current operating income for Bay Area Cycles Co. is $52,000. Selling price per unit is $100, the contribution margin ratio is 20%, and fixed expense is $208,000.

Required:

1. Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold? (all highlighted sections of grid require a value)

2. How many additional unit sales would be necessary to achieve operating income of $130,000?

Current operating income for Bay Area Cycles Co. is $52,000. Selling price per unit is $100, the contribution margin ratio is 20%, and fixed expense is $208,000. Required 1. Calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? Per UnitVolume Total Ratio $ 100.00 100|% | Revenue Variable expense Contribution margin Fixed expense Operating income 20 | % (208,000) $ 52,000 2. How many additional unit sales would be necessary to achieve operating income of $130,000? Additional unit sales units

Explanation / Answer

1) Calculate units :

2) Calculate additioanl unit :

Units on 130000 operating income = (208000+130000)/20 = 16900 units

Additional unit sales = 16900-13000 = 3900 units

Per unit Volume Total Ratio Revenue 100 13000 1300000 100% Variable expense 80 13000 -1040000 80% Contribution margin 20 13000 260000 20% Fixed expense -208000 Operating income 52000

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