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QUESTION:

ANSWERS SHEET:

Fannell Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $60.00. The skateboards are manufactured in an antiquated plant that relies heavily on direct labour workers. Therefore, variable costs are high, totalling $30.00 per skateboard. Over the past year, the company sold 55,000 skateboards, with the following operating results: Sales (55,000 skateboards) $3,300,000 1,650,000 Variable expenses 1,650,000 Contribution margin Fixed expenses 1,320,000 330,000 Operating income Management is anxious to maintain, and perhaps even improve, its present level of income from the skateboards