COMSATS INSTITUTE OF INFORMATION TECHNOLOGY

VIRTUAL CAMPUS

ASSIGNMENT NO. 3

COURSE: Managerial Accounting

Course Code: MGT431

Marks: 10

1) Ahmed’s Bicycle shop sells speed race bicycles. For purposes of a cost volume
profit analysis, the shop owner has divided sales into three categories as
follows:

Sales Invoice Sales

Product Type Price Cost Commissions
High Quality $500 $275 $25
Medium
Quality 300 135 15
Low Quality 150 75 25

Two quarters of the shop`s sales are low-quality bikes and one quarter each to the high quality
and medium quality. The shop`s annual fixed expenses are $67500. (In the following
requirements, ignore income tax).
Required:

 Compute the unit contribution margin for each product type.

 What is the shop`s sales mix?
 Compute the weighted-average unit contribution margin, assuming a constant sales mix.
 What is the shop`s break-even sales volume in dollars? Assume a constant sales mix.
 How many bicycles of each type must be sold to earn a target net income of $50625?
Assume a constant sales mix.

Guidelines:

Dear students, as it is a numerical based question kindly mention all the steps and
formulas CLEARLY that you are using in order to compute it.
You can consult your text book, reference books or internet for your assignment. But copy
paste the internet material in your assignment is strictly prohibited.

Best of Luck 