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In: Accounting
What is your interpretation of the changes to the contribution margin per unit and the operating...
What is your interpretation of the changes to the contribution margin per unit and the operating income on account of the unit price charged to the distributor? At a current operating level of 100,000 units, the company will not have to turn away any of its regular customers in order to fill the special order. If it wishes to increase operating income by $3 per unit included in the special order, it only needs to generate a contribution margin per unit of $3 Thus, the selling price per unit included in the special order is $25 .
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| Interpretation of Contribution margin per unit | |||
| Current | New Order | ||
| Unit Price | 28.00 | 25.00 | |
| Direct materials | 8.00 | 8.00 | |
| Direct Labor | 6.00 | 6.00 | |
| Variable Overhead (9 * 2/3) | 6.00 | 6.00 | |
| Shipping cost | 2.00 | ||
| Total Variable cost | 20.00 | 22.00 | |
| Contribution margin per unit | 8.00 | 3.00 | |
| Decreased by | 5.00 | ||
| Contribution margin per unit is decreased by $ 5 per unit. | |||
| Interpretation of operating income | |||
| Contribution margin per unit from special order | 3.00 | ||
| Level of units | 30,000.00 | ||
| Increase in Operating income by | 90,000.00 | ||
ekkarill92 answered 10 months agoRelated Solutions
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Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...
Price, Variable Cost
per Unit, Contribution Margin, Contribution Margin Ratio, Fixed
Expense
For each of the
following independent situations, calculate the amount(s)
required.
Required:
1. At
the break-even point, Jefferson Company sells 85,000 units and has
fixed cost of $348,600. The variable cost per unit is $0.35. What
price does Jefferson charge per unit? Note: Round to the
nearest cent.
$
2.
Sooner Industries charges a price of $127 and has fixed cost of
$360,500. Next year, Sooner expects to...
Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...
Price, Variable Cost per Unit, Contribution Margin, Contribution
Margin Ratio, Fixed Expense
For each of the following independent situations, calculate the
amount(s) required.
Required:
1. At the break-even point, Jefferson Company
sells 95,000 units and has fixed cost of $349,700. The variable
cost per unit is $0.15. What price does Jefferson charge per unit?
Note: Round to the nearest cent.
$
2. Sooner Industries charges a price of $129
and has fixed cost of $421,000. Next year, Sooner expects to...
Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...
Price, Variable Cost per Unit, Contribution Margin, Contribution
Margin Ratio, Fixed Expense
For each of the following independent situations, calculate the
amount(s) required.
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