Question

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's selling price per composite unit.

Answer 1

Answer:

Selling price per composite unit shall be = $15,150

Explanation:

Provided information,

There are three models,

Youth, Adult and Recreational

Details for each product are:

Youth Selling Price per unit = $300

Adult Selling Price per unit = $850

Recreational Selling Price per unit = $1,000

Sales mix is as follows:

Youth = 5, hence Selling Value = 5 $\times$ $300 = $1,500

Adult = 9, hence Selling Value = 9 $\times$ $850 = $7,650

Recreational = 6, hence Selling Value = 6 $\times$ $1,000 = $6,000

Total Selling Value per sales mix = $1,500 + $7,650 + $6,000 = $15,150

Company's annual fixed cost = $6,500,000

Selling price per composite unit shall be = $15,150