Elizabeth McClary recently began a small snowboard company called Pure Powder. She and her staff have assembled cost information regarding the snowboards.
Variable units costs (per snowboard):
Direct materials $ 25
Direct labor ; 20
Variable manufacturing overhead 7
Variable selling and administrative 3
Fixed costs (for the period):
Fixed manufacturing overhead 24,300
Fixed selling and administrative 40,075
The snowboards sell for $180.
QUESTIONS:
A. What is the unit contribution margin per snowboard?
B. What is the breakeven points in units?
C. Explain what the contribution margin is, and why it is useful for Elizabeth.
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