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You want to open up a custom skateboard shop You can sell each skate

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You want to open up a custom skateboard shop. You can
sell each skateboard for $ 160. It takes 3 hours to make
each skate board. Each skateboard maker earns $25 per
hour. Each skateboard costs $15 in raw materials. You
estimate that your fixed costs are $ 20,000 per month.
What is the contribution margin? How many skateboards
must be sold each month in order to break even? What is
the break- even dollar amount? How many skateboard
must be sold to earn a $ 10,000 profit each month? What
is your total monthly revenue if you want to earn a profit of
$ 8,000?
Solution
a) contribution margin = sales - variable cost
=160 - ($25 * 3hours + $15)
= 160 - 90
= 70
b) Break even sale unit = fixed cost / sales price - variable
cost
=20000 / (160 - 90)
= 20000 / 70
=286 units (Approx 285.7)
c)Break even sale dollar amount = break even units * sale
price

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You want to open up a custom skateboard shop. You can sell each skateboard for $ 160. It takes 3 hours to make each skate board. Each skateboard maker earns $25 per hour. Each skateboard costs $15 in raw materials. You estimate that your fixed costs are $ 20,000 per month. What is the contribution margin? How many skateboards must be sold each month in order to break even? What is the break- even dollar amount? How many skateboard must be sold to earn a $ 10,000 profit each month? What is your total monthly revenue if you want to earn a profit of $ 8,000? Solution a) contribution margin = sa ...
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