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#1 – $640 Per Bike

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

Required:

  1. Complete Presidio’s cost data table.
  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.
  3. 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 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

Bikes Produced and Sold450 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

Bikes Produced and Sold450 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

Bikes Produced and Sold450 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

#2 – $650 Per Bike

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

Required:

  1. Complete Presidio’s cost data table.
  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 $650.
  3. 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 Sold730 Units790 Units1,070 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
*Fixed cost per unit = Total Cost per unit – Variable Cost per unit
Computation of contribution margin at each sales level, if selling price is $650.

2) Contribution Margin Ratio & Its Total contribution Margin

Bikes Produced and Sold730 Units790 Units1,070 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 Sold730 Units790 Units1,070 Units
Total Contribution ($400* units sold)292000316000428000
(-) 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

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