Question

Stan's Scooters plans to sell a standard scooter for $120 and a chrome scooter for $160. Stan's purchases the standard scooter for $30 and the chrome scooter for $40. Stan's expects to sell one standard scooter for every three chrome scooters. Stan's monthly fixed costs are $85,500 Read the requirements Requirement 1. How many of each type of scooter must Stan's Scooters sell each month to break even? Start by selecting the formula and entering the amounts to compute the breakeven point in units for the "package" of products-total scooters to be sold. (Enter a "O for any zero balances. Enter currency amounts to the nearest cent. Abbreviation used: Weighted-avg. CM = weighted-average contribution margin.) - Required sales in units How many of each type of scooter must Stan's Scooters sell each month to break even? Stan's must sell Requirement 2. How many of each type of scooter must Stan's Scooters sell each month to earn $67,500? Start by selecting the formula and entering the amounts to compute the targeted sales dollars required to earn for $67,500 for the "package" of products-total standard scooters and chrome scooters to break even scooters to be sold. (Enter currency amounts to the nearest cent. Abbreviation used: Weighted-avg. CMweighted-average contribution margin.) - Required sales in units To reach the target operating income, Stan's must sell standard scooters and chrome scooters Requirement 3. Suppose Stan's expectation to sell one standard scooter for every three chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.) to profits Each standard scooter contributes$ Therefore, the increase in sales of standard scooters and decrease in sales of chrome scooters would cause the weighted-average contribution margin to to profits while each chrome scooter contributes $ and the breakeven point to Requirements 1. How many of each type of scooter must Stan's Scooters sell each month to 2. How many of each type of scooter must Stan's Scooters sell each month to 3. Suppose Stan's expectation to sell one standard scooter for every three break even? earn $67,500? chrome scooters was incorrect and for every four scooters sold two are standard scooters and two are chrome scooters. Will the breakeven point of total scooters increase or decrease? Why? (Calculation not required.) Print Done

Answer 1

1. (Profit+Fixed cost)/weighted average contribution margin=Required sales units

( 0 +$ 85500)/$112.5(refer note below)=760 units

Stan’s must sell 190 standard scooters and 570 chrome scooters to break even

Note:

Product                                                                standard            crome total

Contribution margin/unit $90                  $120               $450

Sales mix 1    3                       4

Weighted average contribution margin =$ 450/4=$112.5

2. (Profit+Fixed cost)/weighted average contribution margin=Required sales units

( $67500 +$ 85500)/$112.5=1360 units

Since units are sold in the ratio of 1 standard scooter for every 3 chrome scooters

To reach the target operating income Stan’s must sell 340 standard scooters and 1020 chrome scooters to break even

3. The break even point of total scooters will increase as the weighted average contribution margin would fall from $112.5 per unit to $ 105 (refer note below)per unit if for every 2 standard scooters sold stan sells 2 chrome scooters. Since the weighted average contribution margin has decreased we need to sell more units in order to cover the fixed cost i.e break even point is at a higher level.

   Note:

   Product                                                                standard            crome total

   Contribution margin/unit $90                   $120               $420

   Sales mix 2                       2                      4

   Weighted average contribution margin =$ 420/4=$105

Answer 2

your add answer is wrong. it supposed to be 90 and 120