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Adventure Bikes Ltd. manufactures and sells 5 different models of adventure bikes. Adventure Bikes is contemplating...

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Accounting

Adventure Bikes Ltd. manufactures and sells 5 different models of adventure bikes. Adventure Bikes is contemplating a 5% price cut across all 5 models. It expects the price cut to result in a 9% increase in the number of units sold for models E501, E503, and E505. The other two models (E502 and E504) are expected to see a 5% increase in sales volume. Assess the impact of the price cut on Adventure Bikes’ profits and prepare the retained earnings statement.

Model

Sales Price

Variable Costs

Sales Volume

E501

$95

$45

1,000

E502

$105

$50

1,500

E503

$115

$55

2,000

E504

$125

$60

2,500

E505

$135

$65

3,000

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