Homework Answers
| Part 1 | ||||||
| A1 | A2 | |||||
| Sales Price per unit | $ 220 | $ 140 | ||||
| Less:Variable Cost per unit: | ||||||
| Variable manufacturing cost per unit | $ 130 | $ 100 | ||||
| Variable selling expenses per unit | $ 30 | $ 10 | ||||
| Total Variable Cost per unit | $ 160 | $ 110 | ||||
| Contribution margin per unit | $ 60 | $ 30 | ||||
| Part 2 | A1 | A2 | Total | |||
| No. of units sold | 20000 | 10000 | ||||
| Contribution margin per unit | $ 60 | $ 30 | ||||
| Contribution margin | $ 12,00,000 | $ 3,00,000 | $ 15,00,000 | |||
| Less:Traceable Fixed Costs: | ||||||
| Fixed MOH | $ 4,00,000 | $ 3,00,000 | $ 7,00,000 | |||
| Fixed Selling expenses | $ 2,00,000 | $ 1,00,000 | $ 3,00,000 | |||
| Total Traceable Fixed Costs | $ 6,00,000 | $ 4,00,000 | $ 10,00,000 | |||
| Segment Margin | $ 6,00,000 | $ -1,00,000 | $ 5,00,000 | |||
| Part 3 | Income Statement | |||||
| After effect | Before effect | Increase/(Decrease) | ||||
| Sales in units(20000*1.50) | 30000 | |||||
| Sales Price per unit | $ 220 | |||||
| Total Sales | $ 66,00,000 | |||||
| Total Variable Cost(30000*$160) | $ 48,00,000 | |||||
| Contribution margin | $ 18,00,000 | $ 15,00,000 | $ 3,00,000 | |||
| Less:Traceable Fixed Costs: | ||||||
| Fixed MOH | $ 4,00,000 | |||||
| Fixed Selling expenses | $ 4,50,000 | |||||
| Total Traceable Fixed Costs | $ 8,50,000 | |||||
| Segment Margin | $ 9,50,000 | $ 5,00,000 | $ 4,50,000 | |||
| Part 4 | Yes the president was correct in eliminating Product A2 as there is an increase in both Contribution margin and segment margin of the company | |||||
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