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Sportway, Inc: Profitability Analysis, Relevant Costing, and Contribution Margin

See attached file.

1. Which of Sportsway's options makes the best use of its scarce resources. How many skateboards and tackle boxes should be manufactured? How many tackle boxes thsould be purchased?

2. Calculate the improvement in Sportsways's total contribution margin if it adopts the optimal strategy rather than continuing with the status quo.

If Excel is used, please also show the hand calculations for better understanding.


Solution Preview

See attached Excel also.

current profit for the manufacture of 8000
Total per unit
sales 688000 86
less: variable cost
molded plastic(8*8000 units) 64000 8
Hinges ,latches handle(9*8000) 72000 9
direct labor(18.75*8000) 150000 18.75
variable manufacturing overhead(12.5*8000)-50000 50000 6.25
variable selling and administrative overhead(17*8000)-(6*8000) 88000 11
contribution 264000 33
less; fixed costs
fixed manufacturing overhead 50000 6.25
fixed selling and admn overhead(6*8000) 48000 6
profit 166000 20.75

profit from the purchase of tackle box
selling price per ...

Solution Summary

This solution provides calculations for Sportway, Inc. formatted in tables in the attached Excel file.