Please answer ex 20 7 Why is the contribution margin ratio for the Publishing se
ID: 2777289 • Letter: P
Question
Please answer ex 20 7
Why is the contribution margin ratio for the Publishing segment smaller than for that other segment? Does your answer to (b) mean that the other segments are more profitable businesses than the Publishing segment? Buy Best Inc. sells electronic equipment. Management decided early in the year to reduce the price of the speakers in order to increase sales volume. As a result, for the year ended December 31, 2015 the sales increased by $31,875 from the planned level of $1,048,125. The following information is available from the accounting records for the year ended December 31, 2015: Prepare an analysis of the sales quantity and unit price factors. Did the price decrease generate sufficient volume to result in a net increase in contribution margin if the actual variable cost per unit was $ 10, as planned?Explanation / Answer
Statement showing Analysis Particulars Actual Planned Inc or(dec) Analysis Sales 1,080,000.00 1,048,125.00 31,875.00 Total Sales increased due to price reduction No of units Sold 36,000.00 32,250.00 3,750.00 Sales increased by 3750 Units due to price decrease Sales Price 30.00 32.50 (2.50) Sales Price decreased by $2.50 Variable cost per unit 10.00 10.00 - Total Variable cost(VC per unit*No of units sold) 360,000.00 322,500.00 37,500.00 Total Variable cost increase due to increase in no of unist but per unit VC remained same Contribution Margin(Sales-VC) 720,000.00 725,625.00 (5,625.00) Total Contribution has fallen due to reduction in sales price. It is not able to generate sufficient incresae in sales volume to incraese income