Choose all the correct statements

1. Fixed cost per unit is constant as activity increases.

2. Total variable cost increases as activity increases.
3. Variable cost per unit decreases as activity increases.
4. Total mixed cost per unit decreases as activity increases.
5. High-low method is objective, while scattergraph is not.
6. Variable costing is allowed for financial reporting.
7. Cost A is a fixed cost. Units of Activity
8. Cost B is a variable cost. 0 units 100 units 200 units 300 units 400 units
9. Cost C is a variable cost. Total cost of A $1,000 $1,000 $1,000 $1,000 $1,000
10. Cost D is a step cost. Total cost of B 0 100 200 300 400
Total cost of C 300 400 500 600 700
Total cost of D 200 200 200 400 400
Choose all the correct statements
1. Fixed cost per unit is constant as activity increases.
2. Total variable cost increases as activity increases.
3. Variable cost per unit decreases as activity increases.
4. Total mixed cost per unit decreases as activity increases.
5. High-low method is objective, while scattergraph is not.
6. Variable costing is allowed for financial reporting.
7. Cost A is a fixed cost. Units of Activity
8. Cost B is a variable cost. 0 units 100 units 200 units 300 units 400 units
9. Cost C is a variable cost. Total cost of A $1,000 $1,000 $1,000 $1,000 $1,000
10. Cost D is a step cost. Total cost of B 0 100 200 300 400
Total cost of C 300 400 500 600 700
Total cost of D 200 200 200 400 400
Waterbay Inc. makes one model of wooden canoe. Partial information for it follows:

Number of Canoes Produced and Sold

560 640 800
Total costs
Variable costs $ 57,680 ? ?
Fixed costs 140,000 ? ?
Total costs $197,680 ? ?
Cost per unit
Variable cost per unit ? ? ?
Fixed cost per unit ? ? ?
Total cost per unit ? ? ?

Required:
1. Complete the preceding table.
2. Suppose Riverside sells its canoes for $450 each. Calculate the contribution margin per canoe and the
contribution margin ratio.
3. Next year Waterbay expects to sell 750 canoes. Prepare a contribution margin income statement for the
company.
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 ? ?
Fixed costs 140,000 ? ?
Total costs $197,680 ? ?
Cost per unit
Variable cost per unit $103.00
? ? ?
Fixed cost per unit ? ? ?
Total cost per unit ? ? ?

Total Variable Cost

Variable Cost per Unit =
Number of Units
$57,680
=
560
= $103
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 ? ?
Fixed costs 140,000 ? ?
Total costs $197,680 ? ?
Cost per unit
Variable cost per unit $103.00
? ? ?
Fixed cost per unit 250.00
? ? ?
Total cost per unit ?
$353.00 ? ?

Total Fixed Cost

Fixed Cost per Unit =
Number of Units
$140,000
=
560
= $250.00
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? ?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? ? ?
Total cost per unit ?
$353.00 ? ?

Total Variable Cost = Variable Cost per Unit Number of Units

= $103 640

= $65,920
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? ?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? ?
Total cost per unit ?
$353.00 ?
$321.75 ?

Total fixed cost

Fixed cost per unit =
Number of units
$140,000
=
640
= $218.75
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? $ 82,400
?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
$222,400
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? ?
Total cost per unit ?
$353.00 ?
$321.75 ?

Total Variable Cost = Variable Cost per Unit Number of Units

= $103 800

= $82,400
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? $ 82,400
?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
$222,400
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? 175.00
?
Total cost per unit ?
$353.00 ?
$321.75 ?
$278.00

Total Fixed Cost

Fixed Cost per Unit =
Number of Units
$140,000
=
800
= $175.00
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? $ 82,400
?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
$222,400
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? 175.00
?
Total cost per unit ?
$353.00 ?
$321.75 ?
$278.00

Sales Price: $450

Unit Contribution Margin = Sales Price – Variable Cost per Unit

= $450 – $103

= $347
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? $ 82,400
?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
$222,400
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? 175.00
?
Total cost per unit ?
$353.00 ?
$321.75 ?
$278.00

Sales Price: $450

Contribution Margin Ratio= Unit Contribution Margin

Sales Price
$347
=
$450
= 77%
 Number of Canoes Produced and Sold
560 640 800
Total costs
Variable costs $ 57,680 $ 65,920
? $ 82,400
?
Fixed costs 140,000 140,000
? 140,000
?
Total costs $197,680 ?
$205,920 ?
$222,400
Cost per unit
Variable cost per unit $103.00
? ?
$103.00 $103.00
?
Fixed cost per unit 250.00
? 218.75
? 175.00
?
Total cost per unit ?
$353.00 ?
$321.75 ?
$278.00

Sales Price: $450

Number of Units: 750

Waterbay Inc.
Contribution Margin Income Statement
For the Current Year

Sales Revenue (750 $450) $337,500

Less: Variable Costs (750 $103) 77,250
Contribution Margin (750 $347) $260,250
Less: Fixed Costs 140,000
Net Operating Income $120,250