Sandy Bank Inc, makes one model of wooden canoe, Partial information for it foll

Question

Sandy Bank Inc, makes one model of wooden canoe, Partial information for it follows

Number of Canoes Produced and Sold 400 600 750
Total costs
Variable costs $ 67,500 $ ? $ ?
Fixed costs 150,000 ? ?
Total costs $ 217,500 $ ? $ ?

Cost per unit
Variable cost per unit $ ? $ ?$ ?
Fixed cost per unit ? ? ?

Total cost per unit $ ? $ ? $ ?

Required

1. Complete preceeding table

2. Suppose sandy bank sells its canoe for $550 each Calculate the contribution margin per canoe and the contribution ratio

3. This year Sandy banks expect to sell 820 canoes. Prepare a contribution margin income statement for the company

4. Calculate Sandy bank break even point in units and in sales dollars

5. Suppose sandy bank wants to earn $75,000 profit this year. Calculate the number of canoes that must be sold to achieve the target

Explanation / Answer

Solution:

(A). Variable Cost Per Unit:

   Variable Cost Per Unit = Total Variable Cost / No,of Units Produced

   = $ 67,500 / 400

   = $ 168.75

(B). Fixed Cost Per Unit :

Fixed Cost Per Unit =  Total Variable Cost / No,of Units Produced

   = $ 1,50,000 / 600

   = $ 250

(C). Total Cost Per Unit :

   Total Cost Per Unit = Total Variable Cost / No,of Units Produced

   = $ 2,17,500 / 750

   = $ 290

(1). Contribution Gross Margin:

  Sales = 750 Units * 550 each

= 4,12,500

   = 4,12,500 - 67,500

   = 3.45.000

Contribution Margin Ratio:

   Margin Ratio = Contribution Margin / Net Sales * 100

   = 3,45,000 / 4,12,500 * 100

   = 83.63%

(2). Contribution Margin Income Statement:

   Sales ( 750 * 550) = $ 4,12,500

Less: Variable Cost of Goods Sold = $ 67,500

Gross Contribution Margin = $ 3,45,000

Less: Fixed Cost Expencess = $ 1,50,000

Net Contribution Margin = $ 1,95,000

(3). Break-Even Point in Units:

Break-Even Point in Units = $ 1,50,000 / 550 - 168.75

   = $ 393.44

(3)a. Break-Even Point in Dollors:

Break-Even Point in Dollors = $ 1,50,000 / 83.63 %

= 1793.61

(4). Sandy Bank wants to Earn $75,000 Profit:

P.V Ratio:

P.V ratio = 1,95,000 / 4,12,500 * 100

= 47.27

= $1,50,000 + $ 75,000 / 47.27

= 1,96,586.63

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