Tyrene Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $37.50. The skateboards are manufactured in an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $22.50 per skateboard of which 60% is direct labor cost. Over the past year, the company sold 40,000 skateboards, with the following operating results: Sales (40,000 skateboards). $1,500,000
Variable expenses. 900,000 Contribution margin. 600,000
Fixed expenses 480,000
Net operating income.$120.000 Required: 1. Compute (a) the CM ratio and the break-even point in skateboards, and (b) the degree of operating leverage at last year's level of sales. (3 pts)