The following information pertains to Benoit Company\'s three products: D E F Un

Question

The following information pertains to Benoit Company's three products:

                                                                       D                                          E                                            F
Unit Sales per month                            900                                      1400                                       800

        Selling price per unit                              6.00                                   $11.25                                     $7.50

        Varaible costs per unit                           3.00                                       9.00                                        7.80

        Unit contribution margin                        3.00                                       2.25                                       (.30)


Assume that product F is discontinued and the space is used to produce E. Product E's production is increased to 2,200 units per month, but the selling price of all units of E is reduced to $10.20.

What will be the effect on Benoit

Explanation / Answer

Hi,

Please find the answer as follows:

Current Contribution = 900*3 + 1400*2.25 + 800*-.30 = 5610

Revised Contribution = 900*3 + 2200*(10.20 - 9) = 5340

Monthly Profits will decrease by = 5610 - 5340 = 270

Thanks.

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