Question

Riverside Inc. makes one model of wooden canoe. Partial information for it follows:

Number of Canoes Produced and Sold
		525		675		825
Total costs
Variable costs	$	68,775		?		?
Fixed costs		149,300		?		?
Total costs	$	218,075		?		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?		?		?

Required:

1. Complete the table.

3. Suppose Riverside sells its canoes for $517 each. Calculate the contribution margin per canoe and the contribution margin ratio.

4. Next year Riverside expects to sell 875 canoes. Complete the contribution margin income statement for the company.

1.

	Number of Canoes Produced and Sold 525 675 825 Total Costs Variable Costs $68,775 Fixed Costs 149,300 Total Costs $218,075 $0 $0 Cost per Unit Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $0.00 $0.00 $0.00

3.

	Unit Contribution Margin per canoe Contribution Margin Ratio %

4.

	RIVERSIDE INC. Contribution Margin Income Statement For the Next Year Contribution Margin Net Operating Income

Answer 1

1
	Number of Canoes Produced and Sold		525	675	825
	Total costs
	Variable costs		$68,775	$88,425	$108,075
	Fixed costs		$149,300	149,300	149,300
	Total costs		$218,075	$237,725	$257,375
	Cost per unit
	Variable cost per unit		$131.00	$131.00	$131.00
	Fixed cost per unit		$284.38	$221.19	$180.97
	Total cost per unit		$415.38	$352.19	$311.97
	Calculations:-
	Number of Canoes Produced and Sold		525
a	Variable costs		$68,775
b	Fixed costs		$149,300
c	Number of Canoes Produced		525
d	Variable cost per unit (a/c)		$131.00
e	Fixed cost per unit (b/c)		$284.38
f	Total cost per unit (d+e)		$415.38
	Number of Canoes Produced and Sold		675	825
a	Variable cost per unit		$131.00	$131.00
b	Number of Canoes Produced		675	825
c	Variable costs (a*b)		$88,425	$108,075
d	Fixed costs (remains same)		$149,300	$149,300
e	Total cost (c+d)		$237,725	$257,375
f	Fixed cost per unit (d/b)		$221.19	$180.97
g	Total cost per unit (a+f')		$352.19	$311.97
3	Computation of Contribution Margin Per canoe : -
	Selling price per canoe			$517.00
Less:	Variable costs per canoe			$131.00
	Contribution margin per canoe			$386.00
	Computation of Contribution Margin ratio: -
	Contribution Margin ratio	=	Contribution margin per canoe
			Selling price per canoe
		=	$386.00	×100
			$517.00
		=	74.66%
	Contribution Margin ratio	=	74.66%
4	Contribution Margin Income Statement for next year : -
	RIVERSIDE INC.
	Contribution Margin Income Statement
	For the Next Year
a	Sales Revenue (875*$517)		$                        452,375
b	Variable costs (875*$131)		$                        114,625
c	Contribution margin (a-b)		$                        337,750
d	Fixed costs		$                        149,300
e	Net Operating Income (c-d)		$                        188,450

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Thank you.