Question

Speedy's Scooters plans to sell a standard scooter for $250 and a chrome scooter for $300. Speedy's purchases the standard scooter for $125 and the chrome scooter for $150. Speedy's expects to sell one standard scooter for every three chrome scooters. Speedy's monthly fixed costs are $158,125. Read the requirements. How many of each type of scooter must Speedy's Scooters sell each month to break even? Speedy's must sell 275 standard scooters and 825 chrome scooters to break even. Requirement 2. How many of each type of scooter must Speedy's Scooters sell each month to earn $218,500? Start by selecting the formula and entering the amounts to compute the targeted sales dollars required to earn for $218,500 for the "package" of products—total scooters to be sold. (Enter currency amounts to the nearest cent. Abbreviation used: Weighted-avg. CM = weighted-average contribution margin.) Required sales in units + +

Answer 1

	Standard Scooter	Chrome Scooter
Selling price per unit	250	300
Variable cost per unit	125	150
Contribution margin	$125	$150

Sales mix = Standard scooter: Chrome scooter

= 1:3

Weighted average contribution margin per unit = Contribution margin of Standard scooter x Weight of standard scooter + Contribution margin of Chrome scooter x Weight of Chrome scooter

= 125 x 1/4 + 150 x 3/4

= 31.25+112.5

= $143.75

Break even point calculated by you is correct.

2.

(Fixed cost	+	Target profit )	/	Weighted contribution margin per unit	=	Required Sales in Units
(158,125	+	218,500)	/	143.75	=	2,620

Number of standard scooters to be sold = 2,620 x 1/4

= 655

Number of Chrome scooters to be sold = 2,620 x 3/4

= 1,965