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 $580 each. Calculate the contribution margin per canoe and the contribution margin ratio.

3. This year Sandy Bank expects to sell 750 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 $65,000 profit this year. Calculate the number of canoes that must be sold to achieve this target.

Number of Canoes Produced and Sold 470 650 760 Total costs Variable Costs $75,200 Fixed Costs 151,340 151,340 151,340 Total Costs $226,540 $151,340 $151,340 Cost per Unit Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $0.00 $0.00 $0.00

	Unit Contribution Margin per Canoe Contribution Margin Ratio %

• Cost of Goods Sold
• Fixed Costs
• Gross Margin
• Interest Expense
• Net Income After Taxes
• Net Operating Income
• Sales Revenue
• Variable Costs

• This year Sandy Bank expects to sell 750 canoes. Prepare a contribution margin income statement for the company. (Round your intermediate calculations to 2 decimal places.)

  	SANDY BANK, Inc. Contribution Margin Income Statement For the Current Year Contribution Margin Income from Operations

Calculate Sandy Bank’s break-even point in units and in sales dollars. (Round final answers to the nearest whole number.)

	Break-Even Units Canoes Break-Even Sales Revenue

• Suppose Sandy Bank wants to earn $65,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. (Round Unit Contribution Margin to 2 decimal places. Round your answer to the next whole number.)

  	Target Sales Units Canoes

Answer 1

1
Cost per unit	Total costs/No of units
Prepare completed table for cost per unit as shown below:
Number of Canoes Produced and Sold	470	650	760
Total costs
Variable Costs	$75,200.00	$104,000.00	$121,600.00
		(160*650)	(160*760)
Fixed Costs	$151,340.00	$151,340.00	$151,340.00
Total Costs	$226,540.00	$151,340.00	$151,340.00
Cost per Unit
Variable Cost per Unit	$160.00	$160.00	$160.00
	75200/470
Fixed Cost per Unit	$322.00	$232.83	$199.13
	151340/470	151340/650	151340/760
Total Cost per Unit	$482.00	$392.83	$359.13
The Total fixed costs remains same but fixed costs per unit varies with output
The total variable costs varies with output but the variable costs per unit remains same
2
Contribution margin per canoe	Sales price - Variable costs
Contribution margin per canoe	580-160
Contribution margin per canoe	$420.00
Contribution margin ratio	Contribution margin per canoe/Sales price
Contribution margin ratio	420/580
Contribution margin ratio	72.41%
3
SANDY BANK, Inc.
Contribution Margin Income Statement
For the Current Year
Sales revenue (750*580)	$435,000
Less: Variable costs (750*160)	$120,000
Contribution Margin	$315,000
Less: Fixed costs	$151,340
Income from Operations	$163,660
4
Break-even point in units	Fixed costs/Contribution margin per unit
Break-even point in units	151340/420
Break-even point in units	360
Break-even point in sales dollar	Fixed costs/Contribution margin ratio
Break-even point in sales dollar	151340/72.41%
Break-even point in sales dollar	$208,993
5
Target sales unit	(Fixed costs + Target profit)/Contribution margin per unit
Target sales unit	(151340+65000)/420
Target sales unit	515