Taylor Boat Yard produces and sells a line of small boats for recreational use. Production is a machine-intensive process, with the parts for each boat being manufactured on a series of machines run by highly skilled operators. Taylor’s variable costs are direct materials costs, variable machining costs, variable manufacturing overhead costs, and sales commissions. Marion Taylor, the owner, is planning production for the coming year and collects the following data:

	A	B	C	D	E
1		Estimated		Direct	Variable
2		Demand	Selling	Material	Machining
3		(units)	Price	Costs Per Unit	Cost Per Unit
4	Cruiser-LX	1,800	$3,000	$750	$600
5	Cruiser-EX	2,400	2,400	650	500
6	Boater-LX	4,500	2,100	500	500
7	Boater-EX	4,200	2,000	500	400
8	Canoe Star	39,000	800	100	200

Salespeople are paid a 5% commission on each Cruiser or Boater sold, and a 10% commission on each Canoe Star sold. All other marketing and administrative costs are fixed and, along with the fixed manufacturing costs, total $8,750,000.

The annual capacity is 60,000 machine hours, which is limited by the availability of machines. Variable Machining costs are $200 per machine hour, and variable manufacturing overhead equals $50 per machine hour.

Taylor Boat Yards holds negligible inventories to minimize the business risk of changing fads in recreational boating.

1. What is the contribution margin per unit earned from each boat type?

Answer rating: 100% (QA)

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