Question

Thad Morgan, a motorcycle enthusiast, has been exploring the possibility of relaunching the Western Hombre brand of cycle that was popular in the 1930s. The retro-look cycle would be sold for $15,000 and at that price, Thad estimates 300 units would be sold each year. The variable cost to produce and sell the cycles would be $11,250 per unit. The annual fixed
cost would be $1,012,500.
What is the break-even in unit sales?
What is the margin of safety in dollars (Omit the "$" sign in your response.)

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Price= $15000

Q=300

The variable cost to produce and sell the cycles would be $11,250 per unit.

The annual fixed cost would be $1,012,500.

A)break-even point in units=fixed costs/contribution margin= 1012500/(15000-11250)= 270 units

B) margin of safety= budgeted sales - break-even sales

Margin of safety= 4500000-4050000= $450000