Read through the Baldwin Bicycle Case materials and answer the following questions.
1. Based on the income statement for 1992 and the information in item 5 of exhibit 2 that the company sold 98,791 bicycles for 1992, how much was the average per unit sales price, average per unit cost of sales, and average gross margin per bicycle
2. If the yearly fixed manufacturing overhead costs of Baldwin are $1,500,000, and the total cost of sales are as listed in the 1982 income statement, what is the amount of total manufacturing costs that are variable?
3. What are the variable manufacturing costs per unit for the standard Baldwin bicycle?
4. What is the per unit contribution margin (sales price -variable costs) of the standard Baldwin bicycle. Assume that $5 per unit of selling costs are variable?
5. What is the current breakeven point (pre-tax) for Baldwin Bicycles given its existing cost structure assuming that $1.5
million of manufacturing overhead is fixed and all selling and general and administrative costs are fixed (except for the $5 per unit of selling costs that are variable?
6. Based on the average per unit costs of the Challenger, as discussed in Exhibit 2, Item 1 and the fact that the accountant says that about 40% of the overhead costs of the new brand would be variable, how much are the per unit variable manufacturing costs of the new bike?
7. What is the contribution margin per unit (sales price less per unit variable costs) of the new bikes?
8. Exclusive of the costs associated with the additional working capital requirements of the new arrangement, how much would this contract add to the company's bottom line --before taxes assuming sales of 25,000 units less the 3,000 of existing sales that would be cannibalized?