Question

Indigo Snowboards converts regular snowboards by adding outriggers and seats so that people who use wheelchairs can snowboard. The income statement for last year, in which 460 snowboards were produced and sold, appears here: Revenue $147,200 Expenses Variable production costs $56,120 Fixed production costs 25,400 Variable selling and administration 9,200 Fixed selling and administration 33,500 124,220 Income $ 22,980 What volume of snowboards must be sold to earn pretax profits of $28,900? (Round answers to whole amounts, e.g. 5,278.) Volume of snowboards: snowboards LINK TO TEXT Indigo's supplier of snowboards is unable to ship more than 460 boards for the upcoming season. Indigo has been paying the supplier $84 for each snowboard. (The cost of the snowboards is included in variable production costs.) More expensive snowboards are available from other manufacturers for conversion. If Indigo's managers expect to sell more than 460 converted snowboards in the upcoming season, what is the most they would be willing to pay outside suppliers for each additional snowboard? Willing to pay: s LINK TO TEXT Suppose Indigo pays the price you calculated in the previous part and sells an additional 220 snowboards. What is the company's incremental profit on the 220 snowboards? Incremental profits

Answer 1

Answer (a):-

Selling price per Snowboard = 147,200/460

Selling price per Snowboard = $320

Total Variable cost =Variable production cost + Variable selling & administrative cost

Total Variable cost = 56,120+9,200

Total Variable cost = 65,320

Variable cost per snowboard = 65,320/460

Variable cost per snowboard = $142

Total Fixed Cost = 25,400+33,500

Total Fixed Cost = 58,900

Contribution per unit = Selling price per unit - variable cost per unit = 320-140= 178

Sales in quantity to eacn desired profit of $28,900 = (fixed cost +desired profit)/contribution per snowboard

Sales in quantity to eacn desired profit of $28,900 = (58,900+28,900)/178

Sales in quantity to eacn desired profit of $28,900 = 493 snowboards

Answer (b):-

The highest amount that the managers of Snowbirds willing to pay = $84+ $178(conrtibution margin)

The highest amount that the managers of Snowbirds willing to pay to buy more snowboards = $262

Answer (c):-

The incremental profit for 220 units of snowboards will be Zero

because company has paid entire contribution margin to purcahse additional snowboards