You run a small business in Fort Collins, Colorado that manufactures and sells custom replicas of new and old Harley- Davidson, Triumph, BMW, Royal Enfield, and Indian Motorcycles. These replicas are all approximately 6 inches long and 3(1)/(2)inches high, meaing (3.5). Along with your retail/manufacturing shop in Fort Collins, you travel to motorcycle rallies around the country throughout the year selling these attractive, high-quality replicas. Each replica takes 3 hours to produce, has a sales price of $95.00, raw materials for the replica are $16.00, and production labor paid is $15.00 per hour for an employee whose sole job it is to help you produce each replica. Operating expenses are as follow: Your part -time office manager makes $2,500 per month; insurance is $500 per month; rent is $1,700 per month; your average monthly travel expenses to and from rallies are $750 per month and utilities are $400 per month. Show your computations. (20 points) A. How many motorcycle replica units must you average selling each month in your store and at rallies for your business to break - even? Break - even formula B. If you were to sell the minimum number of units required to break even, how many dollars in sales does this represent? C. What is the contribution margin for each replica sold? D. If the goal is to make an average of $4,500 profit each month, how many replicas, on average, must you sell each month?
You run a small business in Fort Collins, Colorado that manufactures and sells custom replicas of new and old Harley- Davidson, Triumph, BMW, Royal Enfield, and Indian Motorcycles. These replicas are all approximately 6 inches long and 3(1)/(2)inches high, meaing (3.5). Along with your retail/manufacturing shop in Fort Collins, you travel to motorcycle rallies around the country throughout the year selling these attractive, high-quality replicas. Each replica takes 3 hours to produce, has a sales price of $95.00, raw materials for the replica are $16.00, and production labor paid is $15.00 per hour for an employee whose sole job it is to help you produce each replica. Operating expenses are as follow: Your part -time office manager makes $2,500 per month; insurance is $500 per month; rent is $1,700 per month; your average monthly travel expenses to and from rallies are $750 per month and utilities are $400 per month. Show your computations. (20 points) A. How many motorcycle replica units must you average selling each month in your store and at rallies for your business to break - even? Break - even formula B. If you were to sell the minimum number of units required to break even, how many dollars in sales does this represent? C. What is the contribution margin for each replica sold? D. If the goal is to make an average of $4,500 profit each month, how many replicas, on average, must you sell each month?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:You run a small business in Fort Collins, Colorado that manufactures and sells custom replicas of new and old Harley-
Davidson, Triumph, BMW, Royal Enfield, and Indian Motorcycles. These replicas are all approximately 6 inches long and
3(1)/(2)inches high, meaing (3.5). Along with your retail/manufacturing shop in Fort Collins, you travel to motorcycle
rallies around the country throughout the year selling these attractive, high-quality replicas. Each replica takes 3 hours to
produce, has a sales price of $95.00, raw materials for the replica are $16.00, and production labor paid is $15.00 per
hour for an employee whose sole job it is to help you produce each replica. Operating expenses are as follow: Your part
-time office manager makes $2,500 per month; insurance is $500 per month; rent is $1,700 per month; your average
monthly travel expenses to and from rallies are $750 per month and utilities are $400 per month. Show your
computations. (20 points) A. How many motorcycle replica units must you average selling each month in your store and
at rallies for your business to break - even? Break - even formula B. If you were to sell the minimum number of units
required to break even, how many dollars in sales does this represent? C. What is the contribution margin for each
replica sold? D. If the goal is to make an average of $4,500 profit each month, how many replicas, on average, must you
sell each month?
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