Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits.
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1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits?
2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income?
3. How many door handles and how many trim kits must be sold for Polaris to break even?
4. Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by $35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain. Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen
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