Question

Number of Canoes Produced and Sold 450 650 800 Total costs Variable costs $ 63,000 $ 91,000 $112,000 Fixed costs 187,200 187,200 187,200 Total costs $250,200 $278,200 $299,200 Cost per unit Variable cost per unit $ 140.00 $ 140.00 $ 140.00 Fixed cost per unit 416.00 288.00 234.00 Total cost per unit $ 556.00 $ 428.00 S 374.00 Riverside sells its canoes for $700 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 (ie. 1234 should be entered as 12.34%) and all other answers to the nearest dollar amount.) Scenario 1 Raises Sales Price to $800 per Canoe Scenario 2 Increase Sales Price and Variable Cost per Unit by 10 Porcent 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

Solution

	Scenario 1-Raises sales Price to $800 per canoe	Scenario 2 Increase sales price and variable cost per unit by 10%	Scenario 3-Derease Fixed cost by 20%
Unit Contribution Margin	$               660.00	$              616.00	$             560.00
Contribution Margin ratio	82.50%	80.00%	80.00%
Contribution Margin Income Statement
Sales	$       800,000.00	$      770,000.00	$    700,000.00
Less: Variable Cost	$       140,000.00	$      154,000.00	$    140,000.00
Contribution Margin	$       660,000.00	$      616,000.00	$    560,000.00
Less: Fixed Cost	$       187,200.00	$      187,200.00	$    149,760.00
Net Operating Income	$       472,800.00	$      428,800.00	$    410,240.00

Working

Scenario 2 sales Price=	($700+10%)	$              770.00
Scenario 2 variable cost per Unit=	($140+10%)	$              154.00