Mendel Paper Compnay Computer paper Napkins Estimated sales volume in units 30,0
ID: 2370352 • Letter: M
Question
Mendel Paper Compnay
Computer paper Napkins
Estimated sales volume in units 30,000 120,000
selling prices $14.00 $7.00
materials Cost 6.00 4.50
units per hour 6 10
Variable overhead per hour $9.00 $6.00
From the original estimates given, prepare estimated contribution margins by product line for the next fiscal quarter. Also, show the contribution margins per unit.
Explanation / Answer
2 Contribution Margin $ 192,500 $ 228,000 $ 252,000 $ 320,000 $ 992,500 CM per unit $ 5.50 $ 1.90 $ 5.60 $ 4.00 3 Break even = CM margin $ 1,013,000 Margin of Safety $ 1,467,000 59.15% Sales -CM 4 Break even = CM margin $ 992,500 Margin of Safety $ 1,557,500 61.08% Sales -CM 5 The closure of mat will reduce the profit of the company as the mat is generating contribution margin in both cases. As far as the variable cost is below the selling price, the product should not be discontinue.