Question

PA5-4 (Algo) Predicting Cost Behavior, Calculating Contribution Margin and Contribution Margin Ratio, Calculating Profit (LO 5-1, 5-5) 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Complete Presidio's cost data table. (Round your Cost per Unit answers to 2 decimal places.) 730 Units 770 Units 1,190 Units $ 182,500 Bikes Produced and Sold Total costs Variable costs Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 536.00 Required 1 Required 2 >

Answer 1

Answer to Requirement 1:

730 770 1,190 Bikes Produced and Sold Total costs Variable costs Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ $ $ 182,500 $ 220,220 $ 402,720 $ 192,500 $ 220,220 $ 412,720 $ 297,500 220,220 517,720 $ 250.00 $ 301.67$ 551.67$ 250.00 $ 286.00 $ 536.00 $ 250.00 185.06 435.06

Answer to Requirement 2:

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $620.00 - $250.00
Contribution margin per unit = $370.00

Contribution margin ratio = Contribution margin per unit / Selling price per unit
Contribution margin ratio = $370.00 / $620.00
Contribution margin ratio = 59.68%

If 730 units are produced and sold:

Contribution margin = Contribution margin per unit * Units produced and sold
Contribution margin = $370.00 * 730
Contribution margin = $270,100

If 770 units are produced and sold:

Contribution margin = Contribution margin per unit * Units produced and sold
Contribution margin = $370.00 * 770
Contribution margin = $284,900

If 1,190 units are produced and sold:

Contribution margin = Contribution margin per unit * Units produced and sold
Contribution margin = $370.00 * 1,190
Contribution margin = $440,300

Answer to Requirement 3:

If 730 units are produced and sold:

Net operating income (loss) = Contribution margin - Fixed costs
Net operating income (loss) = $270,100 - $220,220
Net operating income (loss) = $49,880

If 770 units are produced and sold:

Net operating income (loss) = Contribution margin - Fixed costs
Net operating income (loss) = $284,900 - $220,220
Net operating income (loss) = $64,680

If 1,190 units are produced and sold:

Net operating income (loss) = Contribution margin - Fixed costs
Net operating income (loss) = $440,300 - $220,220
Net operating income (loss) = $220,080