ScholarPak Company produced and sold 76,000 backpacks during the year just ended

Question

ScholarPak Company produced and sold 76,000 backpacks during the year just ended at an average price of $36.00 per unit. Variable manufacturing costs were $15.00 per unit, and variable marketing costs were $7.20 per unit sold. Fixed costs amounted to $546,000 for manufacturing and $220,800 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

1. If ScholarPak

ScholarPak Company produced and sold 76,000 backpacks during the year just ended at an average price of $36.00 per unit. Variable manufacturing costs were $15.00 per unit, and variable marketing costs were $7.20 per unit sold. Fixed costs amounted to $546,000 for manufacturing and $220,800 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

1. If ScholarPak

Explanation / Answer

Contribution margin = Price - Variable cost

for year just ended, Contribution margin = 36 - ( 15+7.2)

Let price be P for coming year, then Contribution margin = P - ( 15*1.10 +7.2)

equating both

P - ( 15*1.10 +7.2) = 36 - ( 15+7.2)

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