alue: 3.00 points E6-5 Calculating Contribution Margin and Contribution Margin R

Question

alue: 3.00 points E6-5 Calculating Contribution Margin and Contribution Margin Ratio; Identifying Break-Even Point, Target Profit [LO 6-1, 6-2] Sandy Bank, Inc., makes one model of wooden canoe. Partial information for it follows: Required 1. Complete the following table. (Round your "Cost per Unit" answers to 2 decimal places.) umber of Canoes Produced and Sold Total costs 440 580 710 Variable Costs Fixed Costs S 65,560 142,560 Total Costs 208,120 Cost per Unit Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $ 0.00 0.000.00 2. Suppose Sandy Bank sells its canoes for $560 each. Calculate the contribution margin per canoe and the contribution margin ratio. (Round your intermediate calculations and final answers to 2 decimal places. Round your "percentage" answer to 2 decimal places. (i.e. .1234 should be entered as 12.34%.)) Unit Contribution Margin Contribution Margin Ratio Canoe 3. This year Sandy Bank expects to sell 800 canoes. Prepare a contribution margin income statement for the company. (Round your intermediate calculations to 2 decimal places.) SANDY BANK, Inc. Contribution Margin Income Statement For the Current Year Contribution Margin Income from Operations 4. Calculate Sandy Bank's break-even point in units and in sales dollars. (Round final answers to the nearest whole number) Break-Even Units Break-Even Sales Revenue Canoes 5. Suppose Sandy Bank wants to earn $77,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. (Round Unit Contribution Margin to 2 decimal places. Round your answer to the next whole number.) es Canoes

Explanation / Answer

1) The Table showing cost per unit and total cost (Amount in $)

2) Unit Contribution Margin = Selling price per canoe - Variable cost per canoe

= $560 - $149 = $411

Contribution Margin Ratio = Contribution margin/Selling price

= $411/$560 = 0.7339 or 73.39%

3) Sandy Bank, Inc.

Contribution Margin Income Statement

For the current year (Amount in $)

4) Break Even units = Fixed cost/Contribution margin per unit

= $142,560/$411 = 347 canoes

Break Even Sales Revenue = Break Even units*Selling price per unit

= 347 canoes*$560 = $194,320

5) Total Contribution required = Fixed costs+Target Profit

= $142,560+$77,000 = $219,560

Target sales units = Total Contribution required/Contribution margin per unit

= $219,560/$411 = 534 canoes

Number of Canoes produced and sold (A) 440 580 710 Total Costs Variable costs (B) 65,560 86,420 105,790 Fixed costs (C) 142,560 142,560 142,560 Total costs (B+C) 208,120 228,980 248,350 Cost per unit Variable cost per unit (D = B/A) 149 149 149 Fixed cost per unit (E = C/A) 324 245.79 200.79 Total cost per unit (D+E) 473 394.79 349.79

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