In: Accounting

E6-5 Calculating Contribution Margin and Contribution Margin Ratio; Identifying Break-Even Point, Target Profit [LO 6-1, 6-2]

Sandy Bank, Inc., makes one model of wooden canoe. Partial
information for it follows:

**Required:
1.** Complete the following table.

Number of Canoes Sold and Purchased | 480 | 570 | 780 |

Total Cost | |||

Variable Costs | $76,320 | ||

Fixed Costs | 155,040 | ||

Total Costs | $231,360 | ||

Cost per unit | |||

Variable Cost per unit | |||

Fixed Cost per Unit | |||

Total Cost per unit |

**2.** Suppose Sandy Bank sells its canoes for $510
each. Calculate the contribution margin per canoe and the
contribution margin ratio. **(Round your intermediate
calculations and final answers to 2 decimal places. Round your
"percentage" answer to 2 decimal places. (i.e. .1234 should be
entered as 12.34%.))**

Unit Contribution Margin | per Canoe | |

Contribution Margin Ratio | % |

**3.** This year Sandy Bank expects to sell 840
canoes. Prepare a contribution margin income statement for the
company. **(Round your intermediate calculations to 2 decimal
places.)**

Sandy Banks, Inc. |

Contribution Margin Income Statement |

For the current year |

Contribution Margin | |

Income From Operations |

**4.** 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 |

**5.** Suppose Sandy Bank wants to earn $72,000
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 Unit | Canoes |

Variable cost remains same per unit of output and fixed costs remain same in total and do not change with change in output

1.

Number of Canoes Sold and Purchased |
480 |
570 |
780 |

Total Cost |
|||

Variable Costs |
$76,320 |
90,630 |
124,020 |

Fixed Costs |
155,040 |
155,040 |
155,040 |

Total Costs |
$231,360 |
245,670 |
279,060 |

Cost per unit |
|||

Variable Cost per unit |
159 |
159 |
159 |

Fixed Cost per Unit |
323 |
272 |
198.77 |

Total Cost per unit |
482 |
431 |
357.77 |

2.Contribution Margin per Canoe = Selling Price per Canoe – Variable Cost per Canoe

= $510-$159 = $351

CM Ratio = CM/Sales

= 351/510

= 68.82%

3.

Sandy Banks, Inc. |

Contribution Margin Income Statement |

For the current year |

Sales 840*510 |
428,400 |

Less: Variable Costs 840*159 |
133,560 |

Contribution Margin |
294,840 |

Less: Fixed Costs |
155,040 |

Income From Operations |
139,800 |

4.Brek even units = Fixed costs/CM per Unit

= 155,040/351

= 442 units

Break even sales revenue = 155,040/68.82%

= $225,283.35

5.Target Profit = $72,000

Add: Fixed Costs = $155,040

Desired Contribution Margin = $227,040

Number of units = 227,040/351

= 647 units

E6-5 Calculating Contribution Margin and Contribution Margin
Ratio; Identifying Break-Even Point, Target Profit [LO 6-1,
6-2]
Sandy Bank, Inc., makes one model of wooden canoe. Partial
information for it follows:
Required:
1. Complete the following table. (Round your "Cost
per Unit" answers to 2 decimal places.)
Number of Canoes Produced and Sold
470
560
720
Total costs
Variable Costs
$70,030
Fixed Costs
153,220
Total Costs
$223,250
$0
$0
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total...

E6-5 Calculating Contribution Margin and Contribution Margin
Ratio; Identifying Break-Even Point, Target Profit [LO 6-1,
6-2]
Sandy Bank, Inc., makes one model of wooden canoe. Partial
information for it follows:
Required:
1. Complete the following table. (Round your "Cost
per Unit" answers to 2 decimal places.)
Number of Canoes Produced and Sold
420
610
730
Total costs
Variable Costs
$61,740
Fixed Costs
142,380
Total Costs
$204,120
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total Cost per...

PA6-1 (Algo) Calculating Contribution Margin, Contribution
Margin Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes produced and sold
500
800
1,000
Total costs
Variable costs
$
118,000
$
?
$
?
Fixed costs per year
?
?
?
Total costs
?
?
?
Cost per unit
Variable cost per unit
?
?
?
Fixed cost per unit
?
?
?
Total cost per unit...

PA6-1 Calculating Contribution Margin, Contribution Margin
Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes produced and
sold
510
800
970
Total costs
Variable costs
$
126,990
$
?
$
?
Fixed costs per year
?
?
?
Total costs
?
?
?
Cost per unit
Variable cost per unit
?
?
?
Fixed cost per unit
?
?
?
Total cost per unit
?...

PA6-1 Calculating Contribution Margin, Contribution Margin
Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes
produced and sold
520
820
1,000
Total costs
Variable
costs
$
123,240
$
?
$
?
Fixed costs per
year
?
?
?
Total costs
?
?
?
Cost per
unit
Variable cost
per unit
?
?
?
Fixed cost per
unit
?
?
?
Total cost per
unit
?...

PA6-1 Calculating Contribution Margin, Contribution Margin
Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
Number of bikes
produced and sold
520
820
1,000
Total costs
Variable
costs
$
123,240
$
?
$
?
Fixed costs per
year
?
?
?
Total costs
?
?
?
Cost per
unit
Variable cost
per unit
?
?
?
Fixed cost per
unit
?
?
?
Total cost per
unit
?...

E6-3 Determining Break-Even Point, Target Profit, Margin of
Safety [LO 6-1, 6-2, 6-3]
Cove’s Cakes is a local bakery. Price and cost information
follows:
Price per cake
$
14.51
Variable cost per
cake
Ingredients
2.16
Direct labor
1.07
Overhead (box,
etc.)
0.12
Fixed cost per
month
$
4,240.80
Required:
1. Determine Cove’s break-even point in units and sales
dollars. (Round your Break-Even Units answer to the nearest
whole number. Round your other intermediate calculations and sales
dollars answer to 2...

E6-3 Determining Break-Even Point, Target Profit, Margin of
Safety [LO 6-1, 6-2, 6-3]
Cove’s Cakes is a local bakery. Price and cost information
follows:
Price per cake
$
13.31
Variable cost per
cake
Ingredients
2.18
Direct labor
1.01
Overhead (box,
etc.)
0.22
Fixed cost per
month
$
3,465.00
1. Determine Cove’s break-even point in units
and sales dollars. (Round your Break-Even Units answer to
the nearest whole number. Round your other intermediate
calculations and sales dollars answer to 2 decimal...

E6-11 Calculating Target Profit, Margin of Safety, Degree of
Operating Leverage [LO 6-2, 6-3, 6-4, 6-5]
Dana’s Ribbon World makes award rosettes. Following is
information about the company:
Variable cost per rosette
$
2.40
Sales price per rosette
5.00
Total fixed costs per month
3900.00
Required:
1. Suppose Dana’s would like to generate a profit of
$1,060. Determine how many rosettes it must sell to achieve this
target profit. (Round your intermediate calculations to 2
decimal places and final answer...

PA5-4 Predicting Cost
Behavior, Calculating Contribution Margin and Contribution Margin
Ratio, Calculating Profit [LO 5-1, 5-5]
Presidio, Inc.
produces one model of mountain bike. Partial information for the
company follows:
Required:
1. Complete Presidio’s cost data table.
(Round your Cost per Unit answers to 2 decimal
places.)
Bikes Produced and Sold
430 Units
870 Units
1606 Units
Total costs
Variable costs
$137,600
Fixed costs per year
Total costs
$137,600
$0
$0
Cost per unit
Variable cost per unit
Fixed cost...

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