Question

Riverside Inc. makes one model of wooden canoe. Partial information for it follows: 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 $ 50,000 $ 75,000 $ 93,750 90,000 90,000 90,000 $140,000 $ 165,000 $183,750 $ 125.00 225.00 $ 350.00 $ 125.00 150.00 $ 275.00 $ 125.00 120.00 $ 245.00 Riverside sells its canoes for $430 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.)

Answer 1

Solution

	Scenario 1-Raises sales Price to $730 per canoe	Scenario 2 Increase sales price and variable cost per unit by 10%	Scenario 3-Derease Fixed cost by 20%
Unit Contribution Margin	$               405.00	$              335.50	$             305.00
Contribution Margin ratio	76.42%	70.93%	70.93%
Contribution Margin Income Statement
Sales	$       530,000.00	$      473,000.00	$    430,000.00
Less: Variable Cost	$       125,000.00	$      137,500.00	$    125,000.00
Contribution Margin	$       405,000.00	$      335,500.00	$    305,000.00
Less: Fixed Cost	$         90,000.00	$        90,000.00	$       72,000.00
Net Operating Income	$       315,000.00	$      245,500.00	$    233,000.00