Topics: Costs, Variable cost, Fixed cost Pages: 2 (304 words) Published: March 13, 2013
* a. Choose the income statement of particular year.

* b. Split up costs in fixed and variable the best you can.

* c. Look for an average price per motor bike to determine how many bikes Envy Rides has sold.

* d. Calculate the variable cost per cycle sold, and assume it is constant.

* e. Draw graph with MC-curve (at the level of the variable cost per cycle), and the average total costs curve.

* f. Be sure to have number of cycles sold on the horizontal axis. Income statement for the year 2009
Variable costs:
* Salaries C\$ 323,966 * Advertising and promotion C\$ 53,424
* Automotive C\$ 26,129
* Telephone C\$ 10,750
* -------------------------------------------------
Office expense C\$ 12,270
Total variable costs C\$ 426,539
Fixed costs:
* Rent and utilities C\$96,900
* Insurance C\$7,258
* License fees and dues C\$12,583
* Professional fees C\$2,192
* Bank charges and interest C\$55,298
* Amortization C\$19,000
-------------------------------------------------
Total fixed costs C\$193,231
Total costs C\$ 619,770

Average price per motorcycle:
2013 Yamaha YZF-R6 : C\$ 11,999.00 for both competitors
We are also use this price, so the average price per motorcycle is set on C\$11,999.00
The sales were C\$3,613,959.00
So, C\$3,613,959.00/ C\$11,999.00 = 301,188 rounded to 301 motorcycles
Variable costs per motorcycle:
C\$ 426,539/301 = C\$ 1,417.07
So variable costs per motorcycle were C\$ 1,417.07
C\$ 619,770/ 301 = C\$ 2,059.04

References:
Prices of the motorcycles, Yamaha...