Question

Presidio, Inc., produces one model of mountain bike. Partial information for the company follows:

Required:

1. Complete Presidio’s cost data table.

2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620.

3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620.

	Bikes Produced and Sold 730 Units 830 Units 1,048 Units Total costs Variable costs $189,800 $215,800 $272,480 Fixed costs per year Total costs $189,800 $215,800 $272,480 Cost per unit Variable cost per unit $260.00 $260.00 $260.00 Fixed cost per unit Total cost per unit $260.00 $531.00 $260.00

Answer 1

1 730 830 1048 Add Bikes Produced & Sold Total Cost: Variable cost Fixed cost Total Cost Cost per unit: Variable cost per unit Fixed cost per unit Total Cost per unit $ $ $ 189,800 224,930 414,730 $ $ $ 215,800 224,930 440,730 $ $ $ 272,480 224,930 497,410 Add 260.00 308.12 568.12 $ $ $ 260.00 $ 271.00 $ 531.00 $ 260.00 214.63 474.63 Variable cost per unit = 189800 / 730 = 260 Fixed cost per unit of 830 units = 531 - 260 = 271 Total fixed cost = 271 per unit x 830 units = 224930 Total fixed cost will remain for all level of activity within relevant range. 2 Bikes Produced & Sold Sales Revenue Variable Cost Contribution Margin 730 452,600 $ 189,800 $ 262,800 $ $ $ $ 830 514,600 $ 215,800 $ 298,800 $ 1048 649,760 272,480 377,280 Less Contribution Margin Sales Revenue Contribution Margin Ratio $ $ Divide 262,800 $ 452,600 $ 58.06% 298,800 $ 514,600 $ 58.06% 377,280 649,760 58.06% Sales revenue = selling price per unit x units 620 x 730 units 620 x 830 units 620x 1048 units Contribution margin ratio = contibution margin / sales revenue x 100 3 $ 15 Less $ Bikes Produced & Sold Sales Revenue Variable Cost Contribution Margin Fixed Cost Net Operating Income 730 452,600 189,800 262,800 224,930 37,870 830 514,600$ 215,800 $ 298,800 $ 224,930 $ 73,870 $ $ $ $ $ $ $ $ $ 1048 649,760 272,480 377,280 224,930 152,350 Less