Question

E5-19 (Algo) 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: 700 850 Number of Canoes Produced and sold 500 Total costs Variable costs $ 90,000 Fixed costs 119,000 Total costs $209,000 Cost per unit Variable cost per unit $ 180.00 Fixed cost per unit 238.00 Total cost per unit $ 418.00 $126,000 119,000 $245,000 $153,000 119,000 $272,000 $ 180.00 170.00 $ 350.00 $ 180.00 140.00 $ 320.00 Riverside sells its canoes for $500 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 2 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 $600 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 Contribution Margin Income Statement Contribution Margin Net Operating Income

Answer 1

Contribution margin income statement

	Scenario 1 : Sales price increase to $600	Scenario 2 Increase sale price and variable cost per unit by 10 percent	Scenario 3 Decrease fixed cost by 20 percent
Unit contribution margin	600-180 = 420	550-198 = 352	500-180 = 320
Contribution margin ratio	420/600 = 70%	352/550 = 64%	320/500 = 64%
Contribution margin income statement
Sales	600000	550000	500000
Variable cost	180000	198000	180000
Contribution margin	420000	352000	320000
Fixed cost	119000	119000	119000*80% = 95200
Net income	301000	233000	224800