3. Luxury Products, Inc., manufactures recreational equipment. One of the companys products, a skateboard, sells for Br. 37.50. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling Br. 22.50 per skateboard. Over the past year the company sold 40,000 skateboards, with the following operating results: Sales (40,000 skateboards) Variable expenses Contribution margin Fixed expenses Net income Br. 1,500,000 900,000 600,000 480,000 Br, 120,000 Management is anxious to maintain and perhaps even improve its present level of income from the skateboards. Instructions: a) Compute the CM ratio and the BEP (in skateboards and in birrs). What is the degree of operating leverage at last years level of sales? b) Due to an increase in labor rates, the company estimates that variable costs will increase by Br. 3.00 per skateboard next year. If this change takes place and the selling price per skateboard remains constant at Br37.50, what will be the new CM ratio and the new BEP (in skateboards and in birrs). c) Refer to the data in (b) above. If the expected change in variable costs takes place, how many skateboards will have to be sold next year to earn the same net income as last year? d) Refer to the data in (b) above. The president has decided that the company may have to raise the selling price on the skateboards. If Luxury Products wants to maintain the same CM ratio as last year, what selling price per skateboard must it charge in next year to cover the increased labor costs? e) Refer to the original data. The company is considering the construction of a new, automated plant to manufacture the skateboards. The new plant would slash variable costs by 40 percent, but it would cause fixed costs to increase by 90 percent. If the new plant were built, what would be the companys new CM ratio and new BEP (in skateboards and in birrs)?