Question

Cost data Number of Bikes Produced and Sold 625 800 1,050 Total costs: Total variable costs Total fixed costs 125000 Total costs Cost per unit: Variable cost per unit Fixed cost per unit Total cost per unit 543.75 $650.00 Bikes produced and sold: Total revenue Variable costs Contribution margin Fixed costs Net operating income Selling price Contribution margin ratio (MC Total revenue) Net operating income / Total revenue

Answer 1

Variable cost per unit remains same and total variable cost changes with the changes in output while total fixed costs remain same and per unit cost changes with change in output.

Total variable cost at 625 units = $125,000

Variable cost per unit = 125,000/625 = $200

Total cost per unit = 543.75

Fixed cost per unit at 800 units = 543.75-200 = $343.75

Total Fixed Costs = $343.75*800 = $275,000

Hence, table is completed as follows:

	625	800	1,050
Total Costs:
Total Variable Costs	125,000	160,000	210,000
Total Fixed Costs	275,000	275,000	275,000
Total Costs	400,000	435,000	485,000
Cost per Unit:
Variable cost per unit	200	200	200
Fixed Cost per Unit	440	343.75	261.90
Total Cost per Unit	640	543.75	461.90
Total Revenue	406,250	520,000	682,500
Variable costs	125,000	160,000	210,000
Contribution Margin	281,250	360,000	472,500
Fixed Costs	275,000	275,000	275,000
Net Operating Income	6,250	85,000	197,500
CM Ratio = CM/Sales	69.23%	69.23%	69.23%
Net Operating Income/Total Revenue	1.54%	16.35%	28.94%