Reference no: EM132660029

Briggs International manufactures aerial ladders for industrial use. Most of their costs are either true variable costs or fixed costs. However, an account analysis shows the following items are mixed costs.

Account                                           Analysis 2018                       Total Cost

Production supervision                 75% fixed                            $200,000
Utilities                                     25% fixed                             $ 80,000
Sales staff wages*                     60% fixed                               $240,000
Quality control inspections**       90% fixed                          $ 60,000

• * The 40% variable portion relates to sales commissions based on total sales.
• ** 50% of manufactured units are inspected each year.
• In 2018 Briggs produced and sold 1,000 ladders at $1,000 each. Management expects to sell 1,200 ladders in 2019, does not anticipate any cost increases due to inflation, and plans to maintain the selling price of $1,000 per ladder.

Problem 1: Assuming direct materials costs are $225 per unit and direct labour costs are $175 per unit, calculate the expected contribution margin for 2019 based on sales of 1,200 ladders.