Saturday 19 May 2012

Paddle Away, Inc., makes one model of wooden canoe. Partial information for it follows:


Paddle Away, Inc., makes one model of wooden canoe. Partial information for it follows:






  Number of canoes produced and sold

465
615
765
  Total costs




      Variable costs
$
64,635  
?
?
      Fixed costs

148,500  
?
?









  Total costs
$
213,135  
?
?
  Cost per unit




      Variable cost per unit

?
?
?
      Fixed cost per unit

?
?
?
  Total cost per unit

?
?
?



Requirement 1:
Complete the preceding table. (Round your cost per unit answers to 2 decimal places. Omit the "$" sign in your response.)








  Number of canoes produced and sold

465

615

765
  Total costs






      Variable costs
$
64,635  
$
85,485 correct  
$
106,335 correct  
      Fixed costs

148,500  

148,500 correct  

148,500 correct  













  Total costs
$
213,135  
$
233,985 correct  
$
254,835 correct  

























  Cost per unit






      Variable cost per unit
$
139.00 correct  
$
139.00 correct  
$
139.00 correct  
      Fixed cost per unit

319.35 correct  

241.46 correct  

194.12 correct  













  Total cost per unit
$
458.35 correct  
$
380.46 correct  
$
333.12 correct
Requirement 3:

Suppose Paddle Away sells its canoes for $504 each. Calculate the contribution margin per canoe and the contribution margin ratio. (Round your percentage answer to nearest whole percentage. Omit the "$" & "%" signs in your response.)










  Unit contribution margin
$
365 correct

  Contribution margin ratio

72 correct
%
 Explanation:
3:
Unit contribution margin       = Sales price – Variable cost per unit
                                         = $504  –  $139
                                         = $365 per canoe

Contribution margin ratio     = Unit contribution margin / Sales price
                                        =  $365 / $504
                                        = 72 %
Requirement 4:
Next year Paddle Away expects to sell 815 canoes. Prepare a contribution margin income statement for the company. (Input all amounts as positive values. Omit the "$" sign in your response.)

Paddle Away Inc.
Contribution Margin Income Statement
For the Current Year
  Sales revenue correct
$
410,760 correct  
  Less: Variable costs correct

113,285 correct  





  Contribution margin correct
$
297,475 correct  
  Less: Fixed costs correct

148,500 correct  





  Income from operations correct
$
148,975 correct  






Explanation:
4:



  Sales Revenue (815 × $504)
$
410,760  
  Less: Variable Costs (815 × $139)

113,285  





  Contribution Margin  (815 × $365)
$
297,475