Question

. value 10.00 points Tyrene Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $42. The skateboards are manufactured in an antiquated plant that relies heavily on direct labour workers. Thus, variable costs are high, totalling $25.20 per skateboard, of which 60% is direct labour cost. Over the past year the company sold 60,000 skateboards, with the following operating results Sales (60,000 skateboards) Variable expenses Contribution margin Fixed expenses Net operating income $2,520,000 1,512,000 1,008,000 840,000 $ 168,000 Management is anxious to maintain and perhaps even improve its present level of income from the skateboards

Answer 1

Answer for 4

Last year Variable cost

(+) Increase in Variable cost

Revised Variable cost

Last year contribution margin %

If Contribution is equal to 40%, then Variable cost % is equal to 60% ( 100% - 40% )

Calculation of Revised Selling price

= ( Revised Variable cost / 60% ) x 100%

= ( $ 28.56 / 60% ) x 100%

= $ 47.60

Answer for 5

Last year Variable cost

(-) Decrease in Variable cost

= Last year variable cost x 40%

Revised Variable cost

Revised Contribution margin per unit

= Selling price - Revised Variable cost

= $ 42.00 - $ 15.12

= $ 26.88

Calculation of Contribution margin %

= ( Contribution margin / Selling price ) x 100

= ( $ 26.88 / $ 42.00 ) x 100

= 64.00 %

Last year Fixed Cost

(+) Increase in Fixed cost

= Last year Fixed cost x 88%

Revised Fixed cost

Break even point in units

= Revised Fixed cost / Revised Contibution margin per unit

= $ 1,579,200 / $ 26.88

= 58,750 units

Answer for 6a

Calculation of number of skateboards

= ( Revised Fixed cost + Desired income ) / Contribution per unit

= ( $ 1,579,200 + $ 168,000 ) / $ 26.88

= $ 1,747,200 / $ 26.88

= 65,000 units