Praveen 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 year’s
plans call for a $290 selling price per 100 yards of XT rope. Its
fixed costs for the year are expected to be $313,200, up to a
maximum capacity of 550,000 yards of rope. Forecasted variable
costs are $203 per 100 yards of XT rope.
2. Prepare a contribution margin income
statement showing sales, variable costs, and fixed costs for
Product XT at the break-even point.
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