Incremental cost of producing 69.

Incremental investment
Raw Material 165833.3
Work in Process 54500
Finished goods 34600
Finished units in warehouse 288333.3
Accounts Receivable 144166.7

Less:Accounts Payable

687433.3

Cost of capital 82492 10.6% is the tax adjusted borrowing cot

Cost per unit 3.29968

Cost per unit 69.2

Selling Price 92.29
Contribution per unit 23.09

Addnl return 577250

Interest 82492
Pre tax return 494758
Post tax return 267169.3
Investment 687433.3
ROI 50.86476

Calculation of Break even sales at current contribution levels

Fixed overheads 3854000 1470000
Variable costs 6545000
Proportion of VC to Sales 0.602005
Break even sales 9635000
Break even volume 87590.91 110.0505

Calculation of Break even sales at revised contribution levels

Fixed costs/Cont per unit 166912.1

160% of one shift capacity

Increased Break even requirement

Possibility of exisitng distributors dropping out
Significance of revised break even
Market segregation between Hi Value and Challenger bikes
Change in distribution channel- effect on long term margins