Answer:
1. Complete the table
Number of canoes produced and sold | 520 | 670 | 820 |
Total Costs | |||
– Variable costs ( Note-1) | $75,400 | $97150 | $118,900 |
– Fixed costs ( Note-2 ) | $149,000 | $149,000 | $149,000 |
Total Costs | $224,400 | $246,150 | $267,900 |
Cost per unit | |||
– Variable Costs per unit (Variable Costs ÷ Number of canoes produced and sold) | $145.00 | $145.00 | $145.00 |
– Fixed costs per unit ( Fixed cost ÷ Number of canoes produced and sold) | $286.54 | $222.39 | $181.71 |
Total Costs per unit ( variable costs per unit + Fixed costs per unit) | $431.54 | $367.39 | $326.71 |
Notes:
1.Variable cost for 520 Number of canoes = 75400
Then variable cost for 1 Number of canoes = $75400 ÷ 520 =$145
Again variable cost for,
670 number of canoes = $145 × 670 = $97150
820 number of canoes = $ 145 × 820 =$ 118900
2.Fixed cost remain same for every change in number of canoes as it is Fixed.
3. Calculation of the Contribution Margin per canoe and the Contribution Margin ratio :
Particular | Amount | Percentage |
Unit Contribution Margin | $370 | |
Contribution Margin Ratio | 72% |
Details:
Unit Contribution Margin = Sales price – variable cost per unit
Unit Contribution Margin = $515 – $145
Unit Contribution Margin = $370
Contribution Margin Ratio = Unit contribution margin ÷ Sales price
= $370 ÷ $515 × 100
Contribution Margin Ratio = 72%
4. Next year Riverside expects to sell 870 canoes. Preparing a contribution margin income statement of the company
Riverside Inc. | |
Contribution Margin Income statement | |
For the Next year | |
Sales revenue (Details 1) | $448050 |
Less: Variable Costs ( Details 2) | $126150 |
Contribution Margin ( Sales revenues – variable cost) | $321900 |
Less: Fixed Costs | $149000 |
Net operating income | $172900 |
Details:
1.Sales revenue = No. Of canoes expected to sell × sales price
= 870 × $515
=$448050
2. Variable costs = No. Of canoes expected to sell × variable cost per unit
= 870 × $145
=$126150
E5-14 Determining Cost Behavior, Preparing Contribution Margin Income Statement [LO 5-1, 5-5] Riverside Inc. makes one...
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