Question

PA5-4 Predicting predicting Cost Behavior, Calculating Contribution Marain and Contribution Margin Ratio, Calculating Profit asidio, Inc. produces one model of mountain bike. Partial information for the company LO follows: Cost Data Number of Bikes Produced and Sold 625 800 1,050 $125,000 Total costs Variable costs Fixed costs per year Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit $581.25 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 $650. 3. Calculate net operating income at each of the sales levels assuming a sales price of $650. PA5-5 Comparing Full Absorption and Variable Costing Refer to the information for Presidio, Inc., in PA5-4. Additional information for Presidio's most recent year of operations follows:

Answer 1

Number of units produced and sold	625 units	800 units	1050 units
Total costs
Variable costs	$125000	(800*$200)= $160000	(1050*$200)= $210000
Fixed costs per year	305000	(800*$381.25)= 305000	305000
Total costs	$430000	$465000	$515000
Cost per unit
Variable cost per unit	(125000/625)= $200	$200	$200
Fixed costs per unit	(305000/625)= 488	(581.25-200)= 381.25	(305000/1050)= 290.48
Total cost per unit	$688	$581.25	$490.48

2) Contribution margin= Sales-Variable cost

Contribution margin ratio= Contribution margin*100/Sales

	625 units	800 units	1050 units
Sales	(625*$650)= $406250	(800*$650)= $520000	(1050*$650)= $682500
Less: Variable cost	(125000)	(160000)	(210000)
Contribution margin	$281250	$360000	$472500
Contribution margin ratio	$281250*100/406250= 69.23%	$360000*100/520000= 69.23%	$472500*100/682500= 69.23%

3) Calculation of Net operating income

	625 units	800 units	1050 units
Contribution margin	$281250	$360000	$472500
Less: Fixed costs	(305000)	(305000)	(305000)
Net operating income (loss)	$(23750)	$55000	$167500