Question

E5-16 Calculating Contribution Margin and Contribution Ratio, Preparing Contribution Margin Income Statement [LO 5-5] Riverside Inc, makes one model of wooden canoe. Partial information for it follows: 450 650 800 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 $ 65,250 280,800 $346,050 $ 94,250 280,800 $375,050 $ 116,000 280,800 $396,800 $ $ 145.00 624.00 $ 769.00 145.00 432.00 577.00 $ 145.00 351.00 $ 496.00 $ Riverside sells its canoes for $800 each. Next year Riverside expects to sell 1,000 canoes. Required: Complete the Riverside's contribution margin income statement for each independent scenario. Assuming each scenario is a variation of Riverside's original data. (Round your unit contribution margin and contribution margin ratio to two decimal places (i.e. .1234 should be entered as 12.34%) and all other answers to the nearest dollar amount.) Scenario 1 Raises Sales Price to $900 per Canoe Scenario 2 Increase Sales Price and Variable Cost per Unit by 10 Percent Scenario 3 Decrease Fixed Cost by 20 Percent $ Unit Contribution Margin Contribution Margin Ratio 655.00 81.88 % Contribution Margin Income Statement Sales Revenue Variable Costs Contribution Margin Fixed Costs Net Operating Income

Answer 1

	Scenario 1 Raises sales price to $900 per canoe	Scenario 2 Increase sales and Variable cost per unit by 10 percent	Scenario 3 Decrease fixed cost by 20 percent
Unit contribution margin	900-145 = 755	990-159.50 = 830.50	800-145 = 655
Contribution margin ratio	755/900 = 83.89%	830.50/990 = 83.89%	655/800 = 81.88%
Contribution margin income statement
Sales	900000	990000	800000
Variable cost	145000	159500	145000
Contribution margin	755000	830500	655000
Fixed cost	280800	280800	280800*80% = 224640
Net operating income	474200	549700	430360