The retail price for the skateboards is $500/each and the helmets are $50/each.

Jonahs manufacturing and marketing costs:

	Total Skateboards	Total Marketing Costs	Total Manufacturing Costs
2015	250	$45,000	$106,000
2016	275	$47,500	$115,000
2017	240	$44,000	$108,000
2018	310	$51,000	$122,000
2019	350	$55,000	$130,000
2020	400	$60,000	$140,000

Zoes manufacturing and marketing costs:

	Total Helmets	Total Marketing Costs	Total Manufacturing Costs
2015	900	$7,500	$38,500
2016	1,200	$9,000	$49,000
2017	1,000	$8,000	$42,000
2018	1,100	$8,500	$45,500
2019	1,400	$10,000	$56,000
2020	1,700	$11,500	$66,500

Deliverable:

Prepare a well written report with the answers to each of the following questions. All calculations must be provided. Charts may be used

QUESTIONS (TOTAL 50 MARKS + 5 BONUS):

1. (10 marks) High-low cost estimation method

1. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the skateboards.
2. Use the high-low method to estimate the per-unit variable costs and total fixed costs for the helmets.

NOTE: FOUR separate high-low analyses must be conducted (two for skateboards manufacturing & marketing and two for helmets manufacturing & marketing)

2. (5 marks) Cost-Volume-Profit (CVP) analysis, single-product

1. Use CVP analysis to calculate the break-even point in units for the skateboards.
2. Use CVP analysis to calculate the break-even point in units for the helmets.

3. (10 marks) CVP, multiple-product setting

Merging the data together, it appears the sales mix is approximately 300 skateboards and 1,200 helmets each year.

For this CVP analysis, assume an additional $30,000 of combined fixed costs, this will be largely customer service costs.

1. Calculate the break-even point for both product lines combined.

4. (5 marks) Cost classification

1. Classify the manufacturing costs, marketing costs, and customer service costs either as production expenses or period expenses.
2. For the period expenses, further classify them into either selling expenses or general and administrative expenses.

5. (5 marks - bonus) Sensitivity CVP analysis and production versus period expenses Multiple-Product Setting

1. If both variable and fixed production expenses (refer to Question #1) associated with the skateboards increased by 5% (beyond the estimate from the high-low analysis), how many skateboards and helmets would need to be sold in order to earn a target income of $96,000? Assume the same sales mix and additional fixed costs in Question #3.

6. (5 marks)Margin of Safety

1. Calculate the margin of safety (both in units and in sales dollars), assuming they sell 700 skateboards and 2,500 helmets next year. Ignore the suggested change in expenses in Question #5.
2. What does this margin of safety mean?

7. (10 marks) Income statement

1. Prepare a forecasted income statement (to the operating income line) for Jonah and Zoe, assuming they sell 700 skateboards and 2,500 helmets, and assuming the 5% cost increase for the skateboards (variable and fixed production costs) and the additional $30,000 combined fixed costs.
2. How would you suggest Jonah and Zoe divide the operating profit?

8. (5 marks) Degree of Operating Leverage

1. Calculate the degree of operating leverage, with the same assumptions as Question #7.
2. What does the DOL tell Jonah and Zoe? Do you think they should consider promotional events? Why or why not?