Question
Bill Johnson, sales manager, and Diane Buswell, controller, at Current Designs are beginning to analyze the cost considerations for one of the composite models of
Bill Johnson, sales manager, and Diane Buswell, controller, at Current Designs are beginning to analyze the cost considerations for one of the composite models of the kayak division. They have provided the following production and operational costs necessary to produce one composite kayak.
Kevlar | $230 | per kayak | |
Resin and supplies | $110 | per kayak | |
Finishing kit (seat, rudder, ropes, etc.) | $180 | per kayak | |
Labor | $400 | per kayak | |
Selling and administrative expensesvariable | $460 | per kayak | |
Selling and administrative expensesfixed | $185,100 | per year | |
Manufacturing overheadfixed | $270,000 | per year |
Bill and Diane have asked you to provide a cost-volume-profit analysis, to help them finalize the budget projections for the upcoming year. Bill has informed you that the selling price of the composite kayak will be $2,200.
Calculate variable costs per unit.
Variable costs | $Type your answer here | per unit |
Determine the unit contribution margin.
Contribution margin | $Type your answer here | per unit |
Using the unit contribution margin, determine the break-even point in units for this product line.
Break-even point | Type your answer here | units |
Assume that Current Designs plans to earn net income of $328,000 on this product line. Using the unit contribution margin, calculate the number of units that need to be sold to achieve this goal.
Number of units to be sold | Type your answer here | units |
Based on the most recent sales forecast, Current Designs plans to sell 1,000 units of this model. Calculate the margin of safety and the margin of safety ratio. (Round percentage to 1 decimal place, 25.5%.)
Margin of safety | $ | ||
Margin of safety ratio | % |
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