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Darringer Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $32. The skateboards are manufactured in an antiquated plant that relies
Darringer Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $32. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $22.40 per skateboard of which 70% is direct labor cost. Over the past year the company sold 45,000 skateboards, with the following operating results: Sales (45,000 skateboards) Variable expenses $1,440,000 1,008,000 Contribution margin Fixed expenses 432,000 288,000 Net operating income 144,000 Management is anxious to maintain and perhaps even improve its present level of income from the skateboards Required: 1a. Compute the CM ratio and the break-even point in skateboards. (Round your contribution margin answer to the nearest whole percent. Round up your break even answer to the nearest whole number.) Contribution margin ratio Unit sales to break-even point skateboards 1b. Compute the degree of operating leverage at last year's level of sales. (Round your answer to 2 decimal places.) ee of operating leverage
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