Question

Sandy Bank, Inc., makes one model of wooden canoe. Partial information is given below.

Required:

1. Complete the following table.

2. Suppose Sandy Bank sells its canoes for $580 each. Calculate the contribution margin per canoe and the contribution margin ratio.

3. This year Sandy Bank expects to sell 760 canoes. Prepare a contribution margin income statement for the company.

4. Calculate Sandy Bank’s break-even point in units and in sales dollars.

5. Suppose Sandy Bank wants to earn $74,000 profit this year. Calculate the number of canoes that must be sold to achieve this target.

Number of Canoes Produced and Sold	500	630	800
Total costs
Variable Costs	$71,500
Fixed Costs	162,500
Total Costs	$234,000	$0	$0
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total Cost per Unit	$0.00	$0.00	$0.00

Unit Contribution Margin		per Canoe
Contribution Margin Ratio		%

SANDY BANK, Inc.
Contribution Margin Income Statement
For the Current Year
Contribution Margin
Income from Operations

Break-Even Units		Canoes
Break-Even Sales Revenue

Target Sales Units

Canoes

Answer 1

Number of Canoes Produced and Sold 500 630 800 Total costs Variable Costs $71,500 90090 800*143 = 114400 Fixed Costs 162,500 162500 162500 Total Costs $234,000 $252590 $276900 Cost per Unit Variable Cost per Unit 71500/500 = 143 143 143 Fixed Cost per Unit 325 257.94 203.13 Total Cost per Unit 468 400.94 346.13

Unit Contribution Margin 580-143 = 437 per Canoe Contribution Margin Ratio 437/580 = 75 %

	SANDY BANK, Inc. Contribution Margin Income Statement For the Current Year Sales (760*580) 440800 Variable cost (760*143) 108680 Contribution Margin 332120 Fixed cost 162500 Income from Operations 169620

	Break-Even Units 162500/437 372 Canoes Break-Even Sales Revenue 372*580 = 215760

	Target Sales Units (162500+74000)/437 = 541 Canoes