Answer:
A. 563 snowboards
B. $120
C. Incremental Profit:$32,000
Explanation:
Volume to meet target profit = (Target Profit + Fixed Cost) / Contribution per unit
<u>Calculation of Contribution per unit</u>
Revenue $150,000
Less Variable Costs ;
Variable production costs ($60,000)
Variable selling and administration ($10,000)
Contribution $80,000
Contribution per unit = $80,000 / 500 snowboards
= $160
Volume to meet target profit = ($30,000 + $25,000 + $35,000) / $160
= 562.50 or 563 snowboards
For the Additional Snowboats,Snowbird's managers are willing to pay a price close <em>to cost of making the regular snowboards internally</em>.
<u>Cost of Making :</u>
Variable production costs ($60,000 / 500) = $120
Total Cost = $120
Therefore, Snowbird's managers are willing to pay $120
For Incremental Profit or Loss, prepare a differential analysis for the additional 200 snowboards.
<u>Differential analysis for the additional 200 snowboards</u>
Sales (200 snowboards × $300) $60,000
Less Incremental Production Costs ( 200 × $120) ($24,000)
Less Incremental selling and administration (200 × $20) ($4,000)
Incremental Profit $32,000
