## #1 – $640 Per Bike

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

Required:

- Complete Presidio’s cost data table.
- 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.
- Calculate net operating income (loss) at each of the sales levels assuming a sales price of $640.

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

### 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

Bikes Produced and Sold | 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

Bikes Produced and Sold | 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

Bikes Produced and Sold | 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 |

## #2 – $650 Per Bike

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

Required:

- Complete Presidio’s cost data table.
- 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 $650.
- Calculate net operating income (loss) at each of the sales levels assuming a sales price of $650.

Complete this question by entering your answers in the tabs below.

Required 1

Required 2

Required 3

Complete Presidio’s cost data table. (Round your Cost per Unit answers to 2 decimal places.)

### Answer

**1) Cost Data Table**

Bikes Produced and Sold | 730 Units | 790 Units | 1,070 Units |

Total Costs | |||

Variable cost | $182,500 | $197,500.00 | $267,500.00 |

Fixed cost per year ($284*790) | $224,360.00 | $224,360.00 | `$224,360.00` |

Total Costs | $406,860 | $421,860.00 | `$491,860` |

Cost per unit | |||

Variable cost pu | $250 | `$250` | `$250` |

Fixed cost pu | $307.34 | $284.00* | $209.68 |

Total cost pu | $557 | $534.00 | $460 |

`Computation of contribution margin at each sales level, if selling price is $650.`

#### 2) Contribution Margin Ratio & Its Total contribution Margin

Bikes Produced and Sold | 730 Units | `790 Units` | 1,070 Units |

`Selling price per unit` (A) | $650 | $650 | $650 |

(-) Variable cost per unit | $250 | $250 | `$250` |

Contribution Margin (B) | $400 | $400 | $400 |

Contribution Margin Ratio (B/A) | 61.54% | 61.54% | 61.54% |

`Total Contribution ($400* units sold)` | $292,000 | $316,000 | $428,000 |

#### 3) Net Operating Income (Loss)

Net Operating Income (Loss) = Sales value – VC – Fixed cost

Bikes Produced and Sold |
| 790 Units | 1,070 Units |

Total Contribution ($400* units sold) | 292000 | 316000 | `428000` |

(-) Fixed Cost | $224,360.00 | $224,360.00 | $224,360.00 |

Net Operating Income (Loss) [Contribution – Fixed Cost] | $67,640.00 | $91,640.00 | $203,640.00 |