Edge Equipment Co. manufactures and markets a number of rope products. Managemen

Question

Edge Equipment Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next years plans call for a $170 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $214,200, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $119 per 100 yards of XT rope.

Estimate Product XT

(a)

Estimate Product XT

Explanation / Answer

a)Breakeveb point in units = 214200/(170-119)= 4200 unitsb)

b)Breakeveb point in sales dollars = 4200*170=714000

3)

Contribution Margin Income Statement (at Break-Even)

Dollars

% contribution

Sales

$        714,000

100%

Variable costs

$        499,800

70%

Contribution margin

$        214,200

30%

Fixed costs

$        214,200

30%

Net income

$                   -  

0%

Contribution Margin Income Statement (at Break-Even)

Dollars

% contribution

Sales

$        714,000

100%

Variable costs

$        499,800

70%

Contribution margin

$        214,200

30%

Fixed costs

$        214,200

30%

Net income

$                   -  

0%

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