Riverside Inc. makes one model ot wooden canoe. Patal intcmation for it follows

Question

Riverside Inc. makes one model ot wooden canoe. Patal intcmation for it follows 400 750 Number of Canoes Froduced and Sold Total cost Variable costs Fbood cost 54,000 5 81,00 101,250 00.000 60,000 60,000 Total coata Cost per unit 5114,000 S 141,000 161,250 Fixed cost per unit Total coat per unit 150.00 1000080.00 5 285.00 523500 215.00 Riversdc sells its canocs tor S3TU cach. Next ycar Rverside cxpccts to scll 1,0DKI canocs Required Complete the Riversida's contrbution margin Income statement for each independent scenano. Assuming each scenano is a vanation cr Riverside's orginal data. (Round your unit contribution margin and contribution margin ratio to two decimal places (.e. .124 should be entered as 12.34%) and all other answers to the nearest dollar amount.) Scenario 1 Ruises 5ales Price to $470 per Cunue Scenurio 2 Increase Sales Price and Variable Cost per Unit by 10 Scenario 3 Decrease Flxed Cost by 20 Percent Percent Uni. Cuntributiun Margin Contribution Margin Ratio Contribution Margin Net Opersting Inconme

Explanation / Answer

Scenario 1: Raises sales price to $470 per Canoe Scenario 2: Increases Sales price and variable cost per unit by 10% Scenario 3: Decreases fixed cost by 20% Number of canoes produced and sold 400 600 750 Cost : Variable cost 54000 81000 101,250 Fixed cost 60000 60000 60000(0.8) = 48000 Total cost 114000 141000 161250 Cost per unit : Variable cost per unit 135 135(1.10) = 148.50 135 Fixed cost per unit 150 100 48000/750 = 64 Total cost per unit 285 248.50 199 Sales Price 470 370*1.10 = 407 370 Unit contribution margin 470-285 = 285 407-248.50 = 158.50 370-199 = 171 Contribution margin rate 285/285 = 1 = 100% 158.50/248.50 = 0.6378 = 63.78% 171/199 = 0.8593 = 85.93% Contribution margin income statement Unit Sales 1000 1000 1000 Sales price 470 407 370 Sales 470,000 407,000 370,000 Fixed Cost of production 150*1000 = 150,000 100*1,000 = 100,000 64*1000 = 64,000 Contribution Margin 470,000-150,000 = 320,000 407,000-100,000 = 307,000 370,000-64,000 = 306,000 Variable expenses in production 135*1000 = 135,000 148.50*1000 =148,500 135*1000 = 135,000 Net operating income 320000-135000 = 185000 307000-148500 = 158,500 306000-135000 = 171,000

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