Snowboard Company is a manufacturer of one model of snowboard. Their current revenues and costs are...
- Snowboard Company is a manufacturer of one model of snowboard. Their current revenues and costs are based on the following information (the base case, copied from Figure 6.6 in the text). Assume the unit sales price decreases by 10 percent from the base case. (6.3)
|
Base Case |
|
|
Sales price per unit |
$250 |
|
Variable cost per unit |
$150 |
|
Monthly fixed costs |
$50,000 |
|
Volume of sales |
700 |
- What is the contribution margin
- Calculate the new projected profit.
- Calculate the dollar change in profit from the base case.
- Calculate the percent change in profit from the base case.
Homework Answers
Contribution Margin = (Selling price per unit - variable costs per unit)*Number of units
= (250-150)*700
= $70,000
b.Projected profit = Contribution Margin - Fixed costs
= (250*0.9 - 150)*700 - 50,000
= $2,500
c. Dollar change in profit = (70,000-50,000) - 2500
= $17,500 decrease
d.% change in profit = 17500/20,000
= -87.5%
i.e. decrease
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