Question

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $440 and has a unit contribution margin of $175; the Adult model sells for $990 and has a unit contribution margin of $520; and the Recreational model sells for $1,140 and has a unit contribution margin of $570. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,640,000, calculate the firm's selling price per composite unit.

Answer 1

$21,370

Step-by-step explanation:

A composite unit is a set of different products grouped together in proportion to their sales mix. The unit is a basis for grouping products from different segments of an entity together with the aim of managing inventory levels, break even points, and sales.

The selling price of the composite unit can be calculated as follows:

||Bicycle model |No. of bicycles |Unit selling price |Total per composite unit

|Youth models| 5 | 440 | 2,200

|Adult models| 9 | 990 | 8,910

|Recreational models| 6 | 1,140 | 10,260

Selling price per composite unit 21,370