Presidio, Inc. produces one model of mountain bike. Partial information for the company follows:
Required:
1. Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)
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 $640. (Round your Margin Ratio percentage answers to 2 decimal places (i.e. .1234 should be entered as 12.34%.))
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $640. (Round your answers to the nearest whole dollar amount.
Answer
1) Cost Data Table:
450 Units | 910 Units | 1628 Units | |
Total Costs | |||
Variable cost | 144000 | (910 * 320) = 291200 | (1628 * 320) = 520960 |
Fixed cost per year | 198380** | 198380** | 198380** |
Total Costs | 342380 | 489580 | 719340 |
Cost per unit | |||
Variable cost pu | 320* | 320* | 320* |
Fixed cost pu | 440.84 | 218 | 121.86 |
Total cost pu | 760.84 | 538 | 441.86 |
*Variable cost per unit = $144000/450 units = $320
VC per unit will remain same
**Fixed Cost:-
In 910 Units:-
Cost pu = $538
Total Cost = $538 * 910 units = $489580
Variable cost for 910 units = 910 units * $320 = $291200
Fixed Cost = Total cost – Variable cost
= 489580 – 291200 = 198380
Fixed cost will remain same in all the above cases irrespective of the no of units produced & sell.
2) Contribution Margin Ratio & its Total contribution Margin:
450 Units | 910 Units | 1628 Units | |
Total contribution Margin | 144000 | 291200 | 520960 |
Contribution Margin Ratio | 50% | 50% | 50% |
SP pu = $640
Contribution Margin = Sale Value – Variable cost
Contribution Margin Ratio = (Contribution Margin / Sale Value) * 100
450 Units | 910 Units | 1628 Units | |
Sale value (A) |
(450 * $640) =288000 |
(910 * $640) =582400 |
(1628 * $640) =1041920 |
(-) Variable Cost | 144000 | 291200 | 520960 |
Contribution Margin (B) | 144000 | 291200 | 520960 |
Contribution Margin Ratio (B/A) |
(144000/288000) * 100 =50% |
(291200/582400) * 100 =50% |
(520960/1041920)*100 =50% |
3) Net Operating Income (Loss):
Net Operating Income (Loss) = Sales value – VC – Fixed cost
450 Units | 910 Units | 1628 Units | |
Sale value |
(450 * $640) =288000 |
(910 * $640) =582400 |
(1628 * $640) =1041920 |
(-) Variable Cost | 144000 | 291200 | 520960 |
Contribution Margin | 144000 | 291200 | 520960 |
(-) Fixed Cost | 198380 | 198380 | 198380 |
Net Operating Income (Loss) | (54380) | 92820 | 322580 |