1.
T1 | T2 | |
Sales | $220,000 | $276,000 |
Less: Variable cost of goods sold | 74,000 | 138,000 |
variable selling and administration | 25,000 | 54,000 |
Contribution Margin | $121,000 | $84,000 |
Contribution Margin ration = Contribution Margin / Sales | 55.00% | 30.43% |
Incremental contribution margin from T1 if T2 is dropped (121000*10%) = $12,100 |
Net effect of discontinuing T2 ($84,000 - $12,100) = $71,900 |
2.
2. Loss of contribution margin T2 = Gain on contribution Margin T1 |
$840000 = 121000 x X% |
X = 69.42% |
3.
3. Loss of contribution margin T2 = Gain on contribution Margin T1 |
$84000 - 45,500 = 121000 x X% |
X = 31.82% |
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Check my work 5 Barbour Corporation, located in Buffalo, New York, is a retailer of high-tech products and is known for...
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