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, selling price necessary to produce one composite kayak and the profit desired.

Kevlar$$

Resin and supplies

Finishing kit $($seat$,$ rudder, ropes, etc.$)$

Labor

Selling and administrative expenses $-$ variable

Selling and administrative expenses $-$ fixed

Manufacturing overhead $-$ fixed

Selling price per unit

Profit desired

Expected units to be sold

$

$250$perkayak

$100$perkayak

$170$perkayak

$420$perkayak

$400$perkayak

$119,700$peryear

$240,000$peryear

$2,000$perkayak

$270,600$

$1,000$kayaks

Bill and Diane have asked you to provide a cost$-$volume$-$profit analysis, to help 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$.$ Complete the CVP table

c$.$ Using the unit contribution margin, determine the break$-$even point in units for this product

d$.$ Assume that Current Designs plans to earn $$270,600$ 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.