Question 1 (6 marks)

Bags Unlimited manufactures and markets backpacks for the youth market. Financial projections for this line of products are revenues of $1,238,000, total variable costs of $841,840 and fixed costs of $218,000. Answer each of the following independent questions.

a. Compute the contribution margin. ______________________

b. Compute the contribution rate. ______________________________

c. How much of this product line does the business need to sell to break even? ___________

d. If the business was to save $56,000 in variable costs by offering fewer colours of backpacks, how much of this product line does the business need to sell to break even?

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