Question

Sandy Bank, Inc., makes one model of wooden canoe. Partial information is given below.

Required:

1. Complete the following table.

2. Suppose Sandy Bank sells its canoes for $520 each. Calculate the contribution margin per canoe and the contribution margin ratio.

3. This year Sandy Bank expects to sell 810 canoes. Prepare a contribution margin income statement for the company.

4. Calculate Sandy Bank’s break-even point in units and in sales dollars.

5. Suppose Sandy Bank wants to earn $70,000 profit this year. Calculate the number of canoes that must be sold to achieve this target.

Complete the following table. (Round your "Cost per Unit" answers to 2 decimal places.)

	Number of Canoes Produced and Sold 480 600 760 Total costs Variable Costs $76,320 Fixed Costs 155,520 Total Costs $231,840 Cost per Unit Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit

Answer 1

Total fixed costs and variable cost per unit remains constant within the relevant range
Number of Canoes Produced and Sold	480	600	760
Total costs
Variable Costs	76,320.00	95,400.00	120,840.00
Fixed Costs	155,520.00	155,520.00	155,520.00
Total Costs	231,840.00	250,920.00	276,360.00
Cost per Unit
Variable Cost per Unit	159.00	159.00	159.00
Fixed Cost per Unit	324.00	259.20	204.63
Total Cost per Unit	483.00	418.20	363.63
1.Contribution margin per unit = Selling price per unit - Variable cost per unit
=520-159 = $361
CM Ratio = CM/Sales
69.42%
Contribution Margin Income Statement
Sales Revenue	421200
Less: Variable costs	128,790.00
Contribution Margin	292,410.00
Fixed costs	155,520.00
Operating Income	136,890.00
Break even point in units = Fixed costs/CM Per unit
430.80
431	canoes
Sales Dollars = Fixed costs/CM Ratio
224,017.73
3.Number of canoes = (70,000+155520)/361
624.7091413	canoes