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		$220	per kayak
Resin and supplies		$160	per kayak
Finishing kit (seat, rudder, ropes, etc.)		$170	per kayak
Direct Labor		$430	per kayak
Selling and administrative expensesvariable		$450	per kayak
Selling and administrative expensesfixed		$227,650	per year
Manufacturing overheadfixed		$290,000	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 $2,300.

(a)

Calculate unit variable costs.

Unit variable costs

$enter the unit variable costs in dollars

per unit

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(b)

Determine the unit contribution margin.

Contribution margin

$enter the contribution margin per unit in dollars

per unit

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(c)

Using the unit contribution margin, determine the break-even point in sales units for this product line.

Break-even point

enter the break-even point in units

units

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(d)

Assume that Current Designs would like to earn net income of $313,200 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

enter a number of units to be sold

units

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(e)

Based on the most recent sales forecast, Current Designs expects to sell 1,000 units of this model. Calculate the margin of safety in dollars and the margin of safety ratio. (Round percentage to 2 decimal places, 25.50%.)

Margin of safety		$enter a dollar amount
Margin of safety ratio		enter percentages rounded to 2 decimal places	%