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 |

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