CD6
CURRENT DESIGNS
Current Designs manufactures two different types of kayak, rotomolded kayaks and composite kayaks.
The following information is available for each product line.
			Rotomolded		Composite
	Sales price/unit		$950		$2,000
	Variable costs/unit		$570		$1,340
The company's fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks
make up 80% of the total units sold.
Instructions
(a)	Determine the weighted-average unit contribution margin for Current Designs.
(b)	Determine the break-even points in units for Current Designs and identify how many units of each
	type of kayak will be sold at the break-even point. (Round to the nearest whole number.)
(c )	Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold.
	Calculate the total number of units that would need to be sold to earn a net income of $2,000,000
	and identify how many units of each type of kayak will be sold at this level of income. (Round to the
	nearest whole number.)
(d)	Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in
	rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed
	costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP
	income statement for each product line.
(e )	Using the information in part (d), calculate the degree of operating leverage for each product line and
	interpret your findings. (Round to two decimal places.)

After you have completed CD6, consider the following additional question.
1.	Assume that variable cost per unit for the rotomolded kayak and composite kayak changed to $610 and
	$1,400 respectively. Show impact of these changes on each of the scenarios provided.