Question

Riverside Inc. makes one model of wooden canoe. Partial information for it follows:

Number of Canoes Produced and Sold
		505		655		805
Total costs
Variable costs	$	66,660		?		?
Fixed costs		148,400		?		?
Total costs	$	215,060		?		?
Cost per unit
Variable cost per unit		?		?		?
Fixed cost per unit		?		?		?
Total cost per unit		?		?		?

Required:
1. Complete the table. (Round your cost per unit answers to 2 decimal places.)

Number of Canoes Produced and Sold	505	655	805
Total Costs
Variable Costs	$66,660
Fixed Costs	148,400
Total Costs	$215,060
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total Cost per Unit

3. Suppose Riverside sells its canoes for $512 each. Calculate the contribution margin per canoe and the contribution margin ratio. (Round your contribution margin to the nearest whole dollar and your contribution margin ratio to the nearest whole percent.)

Unit Contribution Margin
Contribution Margin Ratio		%

4. Next year Riverside expects to sell 855 canoes. Complete the contribution margin income statement for the company.

RIVERSIDE INC.
Contribution Margin Income Statement
For the Next Year
Contribution Margin
Net Operating Income

Answer 1

Solution 1:

Number of Canoes Produced and Sold	505	655	805
Total Costs
Variable Costs	$66,660.00	$86,460.00	$106,260.00
Fixed Costs	$148,400.00	$148,400.00	$148,400.00
Total Costs	$215,060.00	$234,860.00	$254,660.00
Cost per Unit	$425.86	$358.56	$316.35
Variable Cost per Unit	$132.00	$132.00	$132.00
Fixed Cost per Unit	$293.86	$226.56	$184.35
Total Cost per Unit	$425.86	$358.56	$316.35

Solution 2:

Contribution margin per canoe = Sellin price - variable cost = $512 - $132 = $380 per canoe

Contribution margin ratio = $380 / $512 = 74%

Solution 3:

RIVERSIDE INC.
Contribution Margin Income Statement
For the Next Year
Sales (855*$512)	$437,760.00
Variable cost (855*$132)	$112,860.00
Contribution Margin	$324,900.00
Fixed Costs	$148,400.00
Net Operating Income	$176,500.00