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In addition to its Australian business, Big Red Bicycle is considering manufacturing a new range of cheaper bicycles in Indonesia. The following information is available:
. The Indonesian plant has capacity to manufacture 8,000 units.
• Big Red Bicycle's strategic goal is to generate a pretax profit of $1,000,000 for the next financial year for Indonesian operations.
• Clients will pay a maximum of $500 per bicycle Possibility exists for move to Indian plant with capacity for 10,000 units.
. Market for bicycles is growing rapidly and BRB will be able to sell all units produced.
. Limited ability to renegotiate costs with suppliers.
Pricing and cost information is as follows.
Bicycle price per unit $500 (excl. GST)
Current variable costs per unit $250
Fixed costs $1,280,000
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