3 (a) Calculate variable cost per unit. Current Designs.xls Data Review View Home Insert Page Layout Formulas Kevlar Kevlar Resin and supplies Finishing kit (seat, rudder, ropes, etc.) Labor Selling and administrative expenses - variable Total variable costs per unit 2 Resin and supplies 3 Finishing kit (seat, rudder, ropes, etc.) 4 Labor 5 Selling and administrative expenses variable 6 Selling and administrative expensesfixed 7 Manufacturing overhead-fixed $250 per kayak $100 per kayak $170 per kayak $420 per kayak $400 per kayak $119,700 per year $240,000 per year Determine the unit contribution margin. The selling price of the composite kayak will be $2,000. Unit selling price Unit variable cost Unit contribution margin Using the unit contribution margin, determine the break-even point in units for this product line. 20 (c) Selling and administrative expenses - fixed Manufacturing overhead - fixed Total fixed costs (a) Unit contribution margin (b) Break-even points (units) (a - b) $0 $0 Assume that Current Designs plans to earn $270, 600 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal. 29 (d) $0 Total fixed costs Target net income Total fixed costs + target net income (a) Unit contribution margin (6) Units need to be sold (a + b) $0 38 (e) Based on the most recent sales forecast, Current Design plans to sell 1,000 units of this model. Using your results from part (c), calculate the margin of safety and the margin of safety ratio. Margin of safety Actual (expected) sales Break-even sales Margin of safety (dollars) Margin of safety ratio Margin of safety (dollars) (a) Actual (expected) sales (b) Margin of safety ratio (a + b) CD19 - Solution to additional question Assume that the unit selling price per kayak changed to $2,200 each, and fixed manufacturing overhead increased to $360,000. Show impact of these changes on calculations. (a) Calculate variable cost per unit. Kevlar Resin and supplies Finishing kit (seat, rudder, ropes, etc.) Labor Selling and administrative expenses - variable Total variable costs per unit Determine the unit contribution margin. Unit selling price Unit variable cost Unit contribution margin (c) Using the unit contribution margin, determine the break-even point in units for this product line. Selling and administrative expenses - fixed Manufacturing overhead - fixed Total fixed costs (a) Unit contribution margin (b) Break-even points (units) (a - b) (d) Assume that Current Designs plans to earn $270,600 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal. Total fixed costs Target net income Total fixed costs + target net income (a) Unit contribution margin (b) Units need to be sold (a - b) (e) Based on the most recent sales forecast, Current Design plans to sell 1,000 units of this model. Using your results from part (c), calculate the margin of safety and the margin of safety ratio. Margin of safety Actual (expected) sales Break-even sales Margin of safety (dollars) Margin of safety ratio Margin of safety (dollars) (a) Actual (expected) sales (b) Margin of safety ratio (a - b)