A bicycle store costs $2000 per month to operate. The store pays an average of $50 per bike. The average selling price of each bicycle is $90
To determine how many bikes the store needs to sell in order to break even, we need to calculate the company's monthly fixed costs and the variable cost per bike.
The monthly fixed cost is given as $2000 per month.
The variable cost per bike is the cost to the store to purchase each bike, which is $50 per bike.
Now, let's calculate the contribution margin per bike, which is the selling price minus the variable cost per bike. In this case, the selling price is $90 per bike, and the variable cost is $50 per bike.
Contribution Margin = Selling Price - Variable Cost
Contribution Margin = $90 - $50
Contribution Margin = $40
Next, we divide the monthly fixed cost by the contribution margin per bike to determine the number of bikes needed to break even.
Number of Bikes = Monthly Fixed Cost / Contribution Margin
Number of Bikes = $2000 / $40
Number of Bikes = 50
Therefore, the bicycle store needs to sell at least 50 bikes per month to break even.