Question

In: Accounting

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

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 Cost per Unit $0.00 $0.00 $0.00

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 810 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

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 $82,000 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

Solutions

Expert Solution

Answer 1

Variable cost per unit is constant for all level of production. Total fixed cost constant for all level

Number of Canoes Produced and Sold

470

560

720

Total costs

Variable Costs (149*Number of Canoes Produced and Sold)

           70,030

           83,440

         107,280

Fixed Costs

         153,220

         153,220

         153,220

Total Costs

         223,250

         236,660

         260,500

Cost per Unit

Variable Cost per Unit (70030/470)

           149.00

           149.00

           149.00

Fixed Cost per Unit (Fixed Costs / Number of Canoes Produced and Sold)

           326.00

           273.61

           212.81

Total Cost per Unit

           475.00

           422.61

           361.81

Answer 2

Selling price

510

Per Canoe

Less: variable cost

149

Per Canoe

Unit Contribution Margin

361

Per Canoe

Contribution Margin Ratio (Unit Contribution Margin / selling price)

70.78%

%

Answer 3

SANDY BANK, Inc.

Contribution Margin Income Statement

For the Current Year

Sales (810*510)

         413,100

Less: variable cost (810*149)

         120,690

Contribution Margin

         292,410

Less: fixed cost

         153,220

Income from Operations

         139,190

Answer 4

Total fixed cost

         153,220

Divided by : Unit Contribution Margin

361

Break-Even Units

                 424

Canoes

Break-Even Sales Revenue (fixed cost / 70.78% contribution margin ratio)

         216,474

Answer 5

Total fixed cost

         153,220

Add: target profit

           82,000

Total contribution required to earn target profit

         235,220

Divided by : Unit Contribution Margin

361

Target Sales Units

                 652

Canoes


Related Solutions

E6-5 Calculating Contribution Margin and Contribution Margin Ratio; Identifying Break-Even Point, Target Profit [LO 6-1, 6-2]...
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...
E6-5 Calculating Contribution Margin and Contribution Margin Ratio; Identifying Break-Even Point, Target Profit [LO 6-1, 6-2]...
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 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...
PA6-1 (Algo) Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point [LO 6-1, 6-2] Hermosa, Inc., produces...
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...
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...
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...
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...
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...
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]...
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]...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT