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Wave Runners is a boat rental business that has the following costs over the relevant range of 17,000 to 23,000 operating hours for its boats:

	Operating Hours 17,000 19,000 21,000 23,000 Total costs: Variable costs $59,500 Fixed costs 3,120,180 Total costs $3,179,680 $0 $0 $0 Cost per unit: Variable cost Fixed cost Total cost per hour $0.00 $0.00 $0.00 $0.00

Required:

1. Complete the schedule of the company’s total and unit costs. (Round "Cost per unit" answers to 2 decimal places.)

2. Assume that Wave Runners rents it boats for $168 per hour and had 20,000 hours of rentals last year. Prepare a contribution format income statement for the year.

.

Answer 1

	Operating Hours
	17,000	19,000	21,000	23,000
Total costs:
Variable costs	$59,500	19,000 x 3.5 = 66,500	21,000 x 3.5 = 73,500	23,000 x 3.5 =80,500
Fixed costs	3,120,180	3,120,180	3,120,180	3,120,180
Total costs	$3,179,680	$3,186,680	$3,193,680	$3,200,680
Cost per unit:
Variable cost	59,500/17,000 = 3.5	66,500/19,000 = 3.5	73,500/21,000 = 3.5	80,500/23,000 = 3.5
Fixed cost	3,120,180/17,000 = 183.54	3,120,180/19,000 = 164.22	3,120,180/21,000 = 148.58	3,120,180/23,000 = 135.66
Total cost per hour	$187.04	$167.72	$152.08	$139.16

Variable cost per unit = Total variable cost / Number of units

Total variable cost = Variable cost per unit x Number of units

Fixed cost per unit = Total fixed cost / Number of units

Total fixed cost does not change due to change in output.

2.

Contribution Format Income statement
Sales ( 20,000 x 168)	3,360,000
Variable cost ( 20,000 x 3.5)	70,000
Contribution Margin	3,290,000
Fixed cost	-3,120,180
Operating Income	$169,820

Kindly comment if you need further assistance. Thanks‼!