Question

the manufactures two different products. For many years, the company has been profitable and operates at full capacity. However, in the last two years, sale prices were reduced and selling expenses increased because of the competition. Budgeted data for next year are the followings: A2 AI 20,000 $220 $130 10,000 S140 $100 Sales in units Sale price per unit Variable manufacturing costs Variable selling expenses Fixed MOH Fixed Selling expenses $30 $10 $600,000 $200,000 $400.000 $100,000 Additional information: a) All the fixed selling expenses are traceable to each products, b) The fixed MOH include the following traceable fixed costs for each product: $400,000 $300.000 c) The company is manufacturing at capacity and is selling all the units it produces d) All traceable fixed costs are avoidable costs in case the segment is dropped. REQUIRED: 1. Calculate Contribution margin per unit of each product 2. Calculate segment margin for each product

Answer 1

	A1	A2
Sales price per unit	220	140
Variable Manf cost	130	100
Variable selling exp	30	10
Variable portion of moh	20	30
Variable portion of Selling exp	10	10
Contribution/Unit	30	-10
Total Units	20000	10000
Total Contribution	600000	-100000
Unavoidable Fixed cost	200000	100000
Segment Margin	400000	-200000