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Contribution Margin by Segment The following data are for Cabin Craft Apparel: East West Sales volume (units): Product Xx Pro
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Answer #1

Contribution margin = Sales – Variable cost

a.

Contribution margin for YY = Sales units of YY for East x (Sales price – Variable cost for product YY in East) + Sales units of YY for West x (Sales price – Variable cost for product YY in West)

= 3,800 x ($ 22 - $ 13) + 6,000 x ($ 20 - $ 13)

  = (3,800 x $ 9) + (6,000 x $ 7)

= $ 34,200 + $ 42,000 = $ 76,200

b.

Contribution margin for West region = Sales units for XX in West x (Sales price – Variable cost for product XX in West) + Sales units for YY in West x (Sales price – Variable cost for product YY in West)

= 9,900 x ($ 19 - $ 10) + 6,000 x ($ 20 - $ 13)

= (9,900 x $ 9) + (6,000 x $ 7)

= $ 89,100 + $ 42,000 = $ 131,100

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