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II (20 points) Great Lakes Boating Supply Company makes a variety of nautical equipment for boat enthusiasts. Management is evaluating the possible introduction of a
II (20 points) Great Lakes Boating Supply Company makes a variety of nautical equipment for boat enthusiasts. Management is evaluating the possible introduction of a new weather radar system that the company would produce and market in a new separate division of the company. The projected costs and revenues for the new product are as follows: Selling price Direct materials $1,500 per unit $ 650 per unit Direct. labor $ 300 per unit Variable MOH $ 50 per unit Total Fixed MOH $1,900,000 - . Variable Selling and Administrative $ 150 per unit 1920 00 07 900.090 Total fixed Selling and Administrative $ 900,000- Expected sales volume 10,000 units Required: a. Compute the per unit contribution margin. b. Compute the contribution margin ratio. c. Compute the break-even point in units and sales dollars for the new radio division. d. What level of sales, in units, would the company need to achieve to earn a before-tax profit of $1,225,000? e. If the company utilizes an outside marketing firm with a national reputation, the company thinks it will be able to increase sales by 20 percent above the expected sales = 12 003 volume mentioned above. The program would add $450,000 a year to fixed costs. Units Should the special marketing program be used? (Show calculations)
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