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E5-14 Determining Cost Behavior, Preparing Contribution Margin Income Statement [LO 5-1, 5-5] Riverside Inc. makes one...

E5-14 Determining Cost Behavior, Preparing Contribution Margin Income Statement [LO 5-1, 5-5]

Riverside Inc. makes one model of wooden canoe. Partial information for it follows:

Number of Canoes Produced and Sold
455 605 755
Total costs
Variable costs $ 66,430 ? ?
Fixed costs 148,100 ? ?
Total costs $ 214,530 ? ?
Cost per unit
Variable cost per unit ? ? ?
Fixed cost per unit ? ? ?
Total cost per unit ? ? ?


Required:
1. Complete the table. (Round your cost per unit answers to 2 decimal places.)   



3. Suppose Riverside sells its canoes for $501 each. Calculate the contribution margin per canoe and the contribution margin ratio. (Round your contribution margin to the nearest whole dollar and your contribution margin ratio to the nearest whole percent.)


4. Next year Riverside expects to sell 805 canoes. Complete the contribution margin income statement for the company.

Solutions

Expert Solution

Req. 1

Number of canoes produced and sold

455

605

755

Total costs

Variable costs

$  66,430

$ 88,330

$110,230

Fixed costs

  148,100

  148,100

  148,100

Total Costs

$ 214,530

$ 236,430

$ 258,330

Cost per unit

Variable cost per unit

$ 146.00

$ 146.00

$ 146.00

Fixed cost per unit

325.49

  244.79

  196.16

Total cost per unit

$ 471.49

$ 390.79

$ 342.16


Req. 3

Unit contribution margin        = Sales price – Variable cost per unit

= $501 – $146

= $355 per canoe

Contribution margin ratio       = Unit contribution margin / Sales price

                                                = $355 / $501

                                                = 70.86%

Req. 4

Riverside Inc.

Contribution Margin Income Statement

For the Current Year

Sales Revenue (805 x $501)                                       $403,305

Less: Variable Costs (805 x $146)                                 117,530

Contribution Margin   (805 x $355)                            $285,775

Less: Fixed Costs                                                         148,100

Net Operating Income                                                            $137,675.

ekkarill92 answered 1 year ago
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