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 $650.
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $650.

1.

	Bikes Produced and Sold 730 Units 810 Units 1,070 Units Total costs Variable costs $189,800 Fixed costs per year Total costs $189,800 $0 $0 Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $0.00 $557.00 $0.00

2.

	730 Units 810 Units 1,070 Units Total Contribution Margin Contribution Margin Ratio % % %

3.

	730 Units 810 Units 1,070 Units Net Operating Income

Answer 1

1
	Bikes Produced and Sold	730 Units	810 Units	1,070 Units
	Variable costs	$1,89,800	$2,10,600	$2,78,200
	Fixed costs per year	$2,40,570	$2,40,570	$2,40,570
	Total costs	$4,30,370	$4,51,170	$5,18,770
	Cost per unit	$590	$618	$711
	Variable cost per unit	$260	$260	$260
	Fixed cost per unit	$330	$297	$225
	Total cost per unit	$590	$557	$485
	Variable Cost /unit = $189,800/730units = $260
	Total Cost for 810 units = $557 (given in qn)
	So fixed cost per unit for 810 units = $557 - $260 = $297
	Total fixed cost = 810 units * $297 = $2,40,570
2	Bikes Produced and Sold	730 Units	810 Units	1,070 Units
	Revenue ($650*units)	$4,74,500	$5,26,500	$6,95,500
	Varible Cost	$1,89,800	$2,10,600	$2,78,200
	Contribution Margin(Revenue-Variable Cost)	$2,84,700	$3,15,900	$4,17,300
	CM % (CM/Revenue)	60%	60%	60%
3	Bikes Produced and Sold	730 Units	810 Units	1,070 Units
	Revenue ($650*units)	$4,74,500	$5,26,500	$6,95,500
	Varible Cost	$590	$557	$485
	Contribution Margin(Revenue-Variable Cost)	$4,73,910	$5,25,943	$6,95,015
	Fixed Cost	$2,40,570	$2,40,570	$2,40,570
	Net Operating Income (Margin - Fixed Cost)	$2,33,340	$2,85,373	$4,54,445