Solution-What is the effect on the breakeven point

What is the effect on the breakeven point

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Problem - Mody Motors is a small bike dealership. On average, it sells a bike for $2,900, which it purchases from the manufacturer for $2,500. Each month, Mody Motors pays $65,000 in rent and utilities and $75,000 for salespeople's salaries. In addition to their salaries, salespeople are paid a commission of $60 for each bike they sell. Mody Motors also spends $13,000 each month for local advertisements.

Required -

1- How many bikes must Mody Motors sell each month to break even?

2- How many bikes must be sold each month to reach the target monthly net income of $68,000?

3- Calculate the margin of safety assuming that budgeted monthly sales is $1,450,000 from selling 500 bikes.

4- Assume that Mody Motors finds a new supplier with a lower purchase price per pair. What is the effect on the breakeven point?

5- What are the key assumptions of CVP analysis?

Reference no: EM133031168

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What is the effect on the breakeven point

Reference no: EM133031168

Reference no: EM133031168

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