Presidio, Inc. produces one model of mountain bike. Partial information for the company follows:

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 Units910 Units1628 Units
Total Costs
Variable cost144000(910 * 320) = 291200(1628 * 320) = 520960
Fixed cost per year198380**198380**198380**
Total Costs342380489580719340
Cost per unit
Variable cost pu320*320*320*
Fixed cost pu440.84218121.86
Total cost pu760.84538441.86

*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 Units910 Units1628 Units
Total contribution Margin144000291200520960
Contribution Margin Ratio50%50%50%

SP pu = $640

Contribution Margin = Sale Value – Variable cost

Contribution Margin Ratio = (Contribution Margin / Sale Value) * 100

450 Units910 Units1628 Units
Sale value                                 (A)

(450 * $640)

=288000

(910 * $640)

=582400

(1628 * $640)

=1041920

(-) Variable Cost144000291200520960
Contribution Margin              (B)144000291200520960
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 Units910 Units1628 Units
Sale value

(450 * $640)

=288000

(910 * $640)

=582400

(1628 * $640)

=1041920

(-) Variable Cost144000291200520960
Contribution Margin144000291200520960
(-) Fixed Cost198380198380198380
Net Operating Income (Loss)(54380)92820322580

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