Bill johnson, sales manager, and diane buswell, controller at current designs are beginning to analyze the cost
considerations for one of the composite models of the kayak division. they have provided the following production
and operational costs necessary to produce one composite kayak.
kevlar® $250 per kayak
resin and supplies $100 per kayak
finishing kit (seat, rudder, ropes, etc.) $170 per kayak
labor $420 per kayak
selling and administrative expenses - variable $400 per kayak
selling and administrative expenses - fixed $119,000 per year
manufacturing overhead - fixed $240,000 per year
bill and diane have asked you to provide a cost-volume-profit analysis, to them finalize the budget projections for
the upcoming year. bill has informed you that the selling price of the composite kayak will be $2,000.
instructions
(a) calculate variable cost per unit.
(b) determine the unit contribution margin.
(c ) using the unit contribution margin, determine the break-even point in units for this product line.
(d) assume that current designs plans to earn $270,000 on this product line. using the unit contribution
margin, calculate the number of units that need to be sold to achieve this goal.
(e ) based on the most recent sales forecast, current design plans to sell 1,000 units of this model.
using your results from part (c ), calculate the margin of safety and the margin of safety ratio.
note: enter a number in cells requesting a value; enter either a number or a formula in cells with a "? " .
(a) calculate variable cost per unit.
kevlar® $250
resin and supplies 100
finishing kit (seat, rudder, ropes, etc.) 170
labor 420
selling and administrative expenses - variable 400
total variable costs per unit $1,340
(b) determine the unit contribution margin.
unit selling price $2,000
unit variable cost 1,340
unit contribution margin $660
(c ) using the unit contribution margin, determine the break-even point in units for this product line.
selling and administrative expenses - fixed 119000
manufacturing overhead - fixed 24
total fixed costs (a) $359,700
unit contribution margin (b) $660
break-even points (units) (a ÷ b) 545
(d) assume that current designs plans to earn $270,000 on this product line. using the unit contribution
margin, calculate the number of units that need to be sold to achieve this goal.
total fixed costs 359700
target net income 27
total fixed costs + target net income (a) $629,700
unit contribution margin (b) $660
units need to be sold (a ÷ b) 955
(e ) based on the most recent sales forecast, current design plans to sell 1,000 units of this model.
using your results from part (c ), calculate the margin of safety and the margin of safety ratio.
margin of safety
actual (expected) sales $2,000,000
break-even sales $1,090,000
margin of safety (dollars) $910,000
margin of safety ratio
margin of safety (dollars) (a) $910,000
actual (expected) sales (b) $2,000,000
margin of safety ratio (a ÷ b) 45.5%
after you have completed cd-5, consider the following additional question
1. assume that the unit selling price per kayak changed to $2,200 each, and fixed manufacturing overhead
increased to $360,000. show impact of these changes on calculations.
just need with this part you!