Question

The following data are for Trendy Fashion Apparel: North South Sales volume (units): Blouses 5,000 5,000 Skirts 4,000 8,000 Sales price per unit: Blouses $20.00 $22.00 Skirts $18.00 $20.00 Variable cost per unit Blouses $7.00 $9.00 Skirts $9.00 $11.00 Determine the contribution margin for the following:

a. Skirts $

b. The South Region $

Answer 1

Solution:
		Contribution margin
a.	Skirts	$108,000
b.	South Region	$137,000
Working Notes:
	Contribution margin per unit = Selling price per unit - variable cost per unit
a.	Skirts	$108,000
Notes:	Contribution margin for Shirts = Shirts unit in north (Selling price -variable cost ) +   Shirts unit in South (Selling price -variable cost )
		= 4,000 x (18 - 9) + 8,000 x (20 - 11)
		=4,000 x 9 + 8,000 x 9
		=36,000 + 72,000
		=$108,000
b.	South	$108,000
Notes:	Contribution margin for South = Blouses unit in South (Selling price -variable cost ) +   Shirts unit in South (Selling price -variable cost )
		= 5,000 x (22 - 9) + 8,000 x (20 - 11)
		=5,000 x 13 + 8,000 x 9
		=65,000 + 72,000
		=$137,000
Notes:	Selling price & variable cost are taken of the items of which units are taken
Please feel free to ask if anything about above solution in comment section of the question.