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Contribution Margin and Breakeven point Elizabeth Mc Clary recently began a small snowboard company

Contribution Margin and Breakeven point Elizabeth Mc Clary recently began a small snowboard company called Pure Powder. She and her staff have assembled cost information regarding the snowboards.

Variable unit costs                        (per snowboard):
Direct materials                                  $25
Direct labor                                       $20
Variable manufacturing overhead        $7
Variable selling and administrative       $3

Fixed Cost (for the period)
Fixed manufacturing overhead         $24,300
Fixed selling and administrative        $40,075

The snowboard sells for $180.

Questions:
What is the unit contribution margin per snowboard?
What is the breakeven point in units?
Explain what the contribution margin is, and why it is useful information for Elizabeth.

SOLUTION PREVIEW
What is the unit cost contributing margin for snowboard?
 
Unit contribution margin = unit selling price – unit variable cost
                                         = 180 – (25 + 20 + 7 + 3)
                                         = $125 per snowboard


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