Question 3: Total 10 marks (‘a’ 9 Marks and ‘b’ 1 mark)
Part (a): The following information pertains to the two products The Armidale Company deals in:




Jet Bikes

Ski Bikes



Sales price per unit

$8,000

$20,000



Variable cost per unit

$4,800

$14,000



Annual fixed costs: $280,000
How many units must be sold in order for the company to breakeven assuming that it sells five jet bikes for every two ski bikes sold?
Part (b): Briefly explain, how the company’s breakeven point calculations and formula could help the company in planning sales levels to meet its projected future profit targets?
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Hints: you need to calculate 'sales mix' first (how much percent each product's sale in total sale), and then calculate the contribution margin ratio of each product. This contribution margin ratio of (i.e. multiplied by) each product percentage sale in the $200,000 projected sales will give you the operating income of each product."

so you need to make an effort, an understanding of matrix algebra might help but you can do the basic calculations Yourself. Here's a clue calculate the contribution per unit and then determine what that means in contribution from the product mix and avoid the red herrings