Question

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 520 670 820 Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $ 75,400 149,000 $224,400 7 Required: 1. Complete the table. (Round your cost per unit answers to 2 decimal places.) 520 670 820 $ Number of Canoes Produced and Sold Total Costs Variable Costs Fixed Costs Total Costs Cost per Unit Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit 75,400 149,000 224,400 149 $ $ 0 $ $ 0.00 $ 0.00 $ 0.00

Answer 1

Answer:

1. Complete the table

Number of canoes produced and sold	520	670	820
Total Costs
– Variable costs ( Note-1)	$75,400	$97150	$118,900
– Fixed costs ( Note-2 )	$149,000	$149,000	$149,000
Total Costs	$224,400	$246,150	$267,900
Cost per unit
– Variable Costs per unit (Variable Costs ÷ Number of canoes produced and sold)	$145.00	$145.00	$145.00
– Fixed costs per unit ( Fixed cost ÷ Number of canoes produced and sold)	$286.54	$222.39	$181.71
Total Costs per unit ( variable costs per unit + Fixed costs per unit)	$431.54	$367.39	$326.71

Notes:

1.Variable cost for 520 Number of canoes = 75400

Then variable cost for 1 Number of canoes = $75400 ÷ 520 =$145

Again variable cost for,

670 number of canoes = $145 × 670 = $97150

820 number of canoes = $ 145 × 820 =$ 118900

2.​​​​​Fixed cost remain same for every change in number of canoes as it is Fixed.

3. Calculation of the Contribution Margin per canoe and the Contribution Margin ratio :

Particular	Amount	Percentage
Unit Contribution Margin	$370
Contribution Margin Ratio		72%

Details:

Unit Contribution Margin = Sales price – variable cost per unit

Unit Contribution Margin = $515 – $145

Unit Contribution Margin = $370

Contribution Margin Ratio = Unit contribution margin ÷ Sales price

= $370 ÷ $515 × 100

Contribution Margin Ratio = 72%

4. Next year Riverside expects to sell 870 canoes. Preparing a contribution margin income statement of the company

Riverside Inc.
Contribution Margin Income statement
For the Next year
Sales revenue (Details 1)	$448050
Less: Variable Costs ( Details 2)	$126150
Contribution Margin ( Sales revenues – variable cost)	$321900
Less: Fixed Costs	$149000
Net operating income	$172900

Details:

1.Sales revenue = No. Of canoes expected to sell × sales price

= 870 × $515

=$448050

2. Variable costs = No. Of canoes expected to sell × variable cost per unit

= 870 × $145

=$126150