Question

Wave Runners is a boat rental business that has the following costs over the relevant range of 18,000 to 24,000 operating hours for boats: Required: 1. Complete the schedule of the company's total and unit costs. (Round "Cost per unit" answers to 2 decimal places.) Operating Hours 20,000 22,000 18,000 24,000 Total costs: Variable costs 68,4001 277.2007 345,600 277,2007 277,200 277,200 277,200 277,200 277,200 $ $ $ $ Fixed costs Total costs Cost per unit: Variable cost Fixed cost Total cost per hour 2. Assume that Wave Runners rents it boats for $18 per hour and had 21,000 hours of rentals last year. Prepare a contribution format income statement for the year Sales Variable expenses Contribution margin Fixed expenses Operating income

Answer 1

1)

	Operating Hours
	18000	20000	22000	24000
Total costs:
Variable costs	$68400	(20000*$3.80)= 76000	(22000*$3.80)= 83600	(24000*$3.80)= 91200
Fixed costs	277200	277200	277200	277200
Total costs	$345600	$353200	$360800	$368400
Cost per unit:
Variable cost	(68400/18000)= $3.80	$3.80	$3.80	$3.80
Fixed cost	(277200/18000)= 15.40	(277200/20000)= 13.86	(277200/22000)= 12.60	(277200/24000)= 11.55
Total cost per unit	$19.20	$17.66	$16.40	$15.35

2)

Sales (21000*$18)	$378000
Variable expenses (21000*$3.80)	79800
Contribution margin	298200
Fixed expenses	(277200)
Operating income	$21000