Darringer Products manufactures recreational equipment. One of the companys products, a skateboard, sells for $42.00. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $25.20 per skateboard of which 60% is direct labor cost.

Over the past year the company sold 44,000 skateboards, with the following operating results:

Sales (44,000 skateboards)

$

1,848,000

Variable expenses

1,108,800

Contribution margin

739,200

Fixed expenses

470,400

Net operating income

$

268,800

Refer to the data in (2) 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 operating income, $268,800, as last year?

5.

Refer to the original data. The company is considering the construction of a new, automated plant. The new plant would slash variable costs by 40%, but it would cause fixed costs to increase by 99%. If the new plant is built, what would be the companys new CM ratio and new break-even point in skateboards?