Question

In: Accounting

Presidio, Inc., produces one model of mountain bike. Partial information for the company follows: Required: 1....

Presidio, Inc., produces one model of mountain bike. Partial information for the company follows:

Required:
1. Complete Presidio’s cost data table.
2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620.
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620.

Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

Bikes Produced and Sold 740 Units 890 Units 1,348 Units
Total costs
Variable costs $192,400 $231,400 $350,480
Fixed costs per year
Total costs $192,400 $231,400 $350,480
Cost per unit
Variable cost per unit $260.00 $260.00 $260.00
Fixed cost per unit 284.00
Total cost per unit $260.00 $544.00 $260.00

Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620. (Round your Contribution Margin Ratio percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34%.))

740 Units 890 Units 1,348 Units
Total Contribution Margin
Contribution Margin Ratio % % %

Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620. (Round your answers to the nearest whole dollar amount.)

740 Units 890 Units 1,348 Units
Net Operating Income

Solutions

Expert Solution

1
Bikes Produced and Sold 740 Units 890 Units 1,348 Units
Total costs
Variable costs 192400 231400 350480
Fixed costs per year 252760 252760 252760
Total costs 445160 484160 603240
Cost per unit
Variable cost per unit 260.00 260.00 260.00
Fixed cost per unit 341.57 284.00 187.51
Total cost per unit 601.57 544.00 447.51
2
740 Units 890 Units 1,348 Units
Total Contribution Margin 266400 320400 485280
Contribution Margin Ratio 58.06% 58.06% 58.06%
3
740 Units 890 Units 1,348 Units
Total Contribution Margin 266400 320400 485280
Less: Fixed costs 252760 252760 252760
Net Operating Income 13640 67640 232520
Workings:
Fixed costs per year 252760 =284*890
740 Units 890 Units 1,348 Units
Total Contribution Margin =740*(620-260) =890*(620-260) =1348*(620-260)
Contribution Margin Ratio 58.06% =(620-260)/620

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