eBook Learning Objective 5 Calculator Contribution Margin Analysis—Sales Select
ID: 2433249 • Letter: E
Question
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Learning Objective 5
Calculator
Contribution Margin Analysis—Sales
Select Audio Inc. sells electronic equipment. Management decided early in the year to reduce the price of the speakers in order to increase sales volume. As a result, for the year ended December 31, the sales increased by $17,700 from the planned level of $941,700. The following information is available from the accounting records for the year ended December 31.
a. Prepare an analysis of the sales quantity and unit price factors. Use a minus sign for any negative amounts.
b. Did the price decrease generate sufficient volume to result in a net increase in contribution margin if the actual variable cost per unit was $7, as planned?
Explanation / Answer
Answer:
A)
Select Audio Inc.
Contribution Margin Analysis—Sales
For the Year Ended December 31
Effect of changes in sales:
Sales quantity factor
116100
Unit price factor
-98400
Total effect of changes in sales
17700
Working notes for the above answer is as under
Sales Quantity Factor
= (Actual Quantity - planned Quantity) * Planned Sales Price
= (24600-21900 ) * 43
= $ 116100
Unit Price Factor
= (Actual Sales Price - Planned Sales Price) * Actual Units
= (39*43 ) * 24600
= -98400
_______________________________________________
2
Yes, the price decrease generate sufficient volume to result in a net increase in contribution margin if the actual variable cost per unit was $7, as planned
Select Audio Inc.
Contribution Margin Analysis—Sales
For the Year Ended December 31
Effect of changes in sales:
Sales quantity factor
116100
Unit price factor
-98400
Total effect of changes in sales
17700
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