Question

400 600 750 Number of Canoes Produced and sold Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 54,000 60,000 $114,000 $81,000 60,000 $ 141,000 $101,250 60,000 $161,250 $ 135.00 150.00 $ 285.00 $135.00 100.00 $ 235.00 $135.00 80.00 $ 215.00 Riverside sells its canoes for $370 each. Next year Riverside expects to sell 1,000 canoes. Required: Complete the Riverside's contribution margin income statement for each independent scenario. Assuming each scenario is a variation of Riverside's original data. (Round your unit contribution margin and contribution margin ratio to 2 decimal places (i.e. 1234 should be entered as 12.34%) and all other answers to the nearest dollar amount.) Scenario 1 Raises Sales Price to $470 per Canoe Scenario 2 Increase Sales Price and Variable Cost per Unit by 10 Percent Scenario 3 Decrease Fixed Cost by 20 Percent Unit Contribution Margin Contribution Margin Ratio Contribution Margin Income Statement Contribution Margin Net Operating Income

Answer 1

Scenario I

selling price per unit= 470                            

variable cost per unit = = 135

Contribution per unit = sale price – variable cost

                                      = 370-135

                                       = 335       

     contribution margin ratio = ( contribution / sales )*100

                                                 = (335/470) *100 = 71.28%

Scenario II

selling price per unit= 370 + 10%

                                     = 370+37 = 407                           

variable cost per unit = = 135+10% = 148.5

Contribution per unit = sale price – variable cost

                                      = 407-148.5

                                       = 258.5     

     contribution margin ratio = ( contribution / sales )*100

                                                 = (258.5/407) *100 = 63.51 %

Scenario III

selling price per unit= 370

                                    

variable cost per unit = = 135

Contribution per unit = sale price – variable cost

                                      = 370-135

                                       = 235  

     contribution margin ratio = ( contribution / sales )*100

                                                 = (235/370) *100 = 63.51 %

scenario 3

fixed cost = 60000-20% = 48000

	Marginal Income statement for year
		scenario i			scenario ii			scenario iii
	Particulars	units	price per unit	Total	units	price per unit	Total	units	price per unit	Total
	sales	400	470	188000	600	407	244200	750	370	277500
less ;	variable cost	400	135	54000	600	148.5	89100	750	135	101250
	contribution			134000			155100			176250
less ;	Fixed cost			60000			60000			48000
	Net operating income			74000			95100			128250