Question

Contribution Margin Analysis

Mathews Company manufactures only one product. For the year ended December 31, the contribution margin increased by $10,864 from the planned level of $464,436. The president of Mathews Company has expressed some concern about this increase and has requested a follow-up report.

The following data have been gathered from the accounting records for the year ended December 31:

	Actual		Planned		Difference—Increase (Decrease)
Sales	$911,800		$895,698		$16,102
Variable costs:
Variable cost of goods sold	$349,200		$364,914		$(15,714)
Variable selling and administrative expenses	87,300		66,348		20,952
Total variable costs	$436,500		$431,262		$(5,238)
Contribution margin	$475,300		$464,436		$10,864
Number of units sold	9,700		11,058
Per unit:
Sales price	$94		$81
Variable cost of goods sold	36		33
Variable selling and administrative expenses	9		6

Required:

1. Prepare a contribution margin analysis report for the year ended December 31.

Mathews Company
Contribution Margin Analysis
For the Year Ended December 31
Planned contribution margin		$
Effect of changes in sales:
Sales quantity factor	$
Unit price factor
Total effect of changes in sales
Effect of changes in variable cost of goods sold:
Variable cost quantity factor	$
Unit cost factor
Total effect of changes in variable cost of goods sold
Effect of changes in selling and administrative expenses:
Variable cost quantity factor	$
Unit cost factor
Total effect of changes in selling and administrative expenses
Actual contribution margin

Answer 1

Solution:

Mathews Company
Contribution margin analysis
Particulars	Details	Amount
Planned contribution Margin		$464,436.00
Effect of changes in Sales:
Unit Price factor	$126,100.00
Sales Quantity Factor	-$109,998.00
Total effect of changes in sales		$16,102.00
Effect of changes in variable cost of goods sold:
Unit cost factor	-$29,100.00
Variable cost quantity factor	$44,814.00
Total Effect of changes in variable cost of goods sold		$15,714.00
Effect of changes in variable selling and adminstrative expenses:
Unit cost factor	-$29,100.00
Variable cost quantity factor	$8,148.00
Total Effect of changes in variable selling and administrative expenses		-$20,952.00
Increase in contribution margin from change in variable cost		-$5,238.00
Total increase in contribution margin		$10,864.00
Actual contribution margin		$475,300.00