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.)
|
2. Suppose Sandy Bank sells its canoes for $500
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%.))
|
3. This year Sandy Bank expects to sell 800 canoes. Prepare a contribution margin income statement for the company. (Round your intermediate calculations to 2 decimal places.)
|
|||||||||||||||||||||||||
4. Calculate Sandy Bank’s break-even point in units and in sales dollars. (Round final answers to the nearest whole number).
|
5. Suppose Sandy Bank wants to earn $78,000
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.)
|
Solutions
Expert Solution
** Note : Fixed cost does not change with change in the level of output so, the total fixed cost will remain $142380 only for the question. But, but per unit fixed cost decreases with increase in production & increases with decrease in production.
** Therefore, contribution margin = $353 & Contribution Ratio = 70.60%
Income Statement :
** Break Even point & Desired Profit :
In order to achieve break even point sandy bank should sell 403 canoes approximately. & for achieving a profit of $78000, they should sell 624 canoes
ekkarill92 answered 10 months agoRelated Solutions
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Fixed costs per
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