Question

Assume Digby expands operations in Asia Pacific in the coming year. In doing so, they have added capacity to fill all demand in-house and have increased automation to reduce labor cost by 10%. For clarity, assume the following are true: Daze material cost is still $12.75. Daze labor cost last year was $9.00. Daze will be priced at $32.50 per unit, in American dollars. Shipping costs from the Americas to Asia Pacific are $2.50 per unit. What will Daze's contribution margin be in Asia Pacific for the coming year

Answer 1

Answer:

$9.15

Explanation:

Contribution margin is the net value of sales and variable cost of a product. We need to deduct variable cost from selling price of a product to calculate the contribution margin .

First we need to determine the total variable cost.

Labor Cost ( $9 x ( 1 - 0.1 ) ) $8.1

Material cost                        $12.75

Shipping cost                       $2.50

Total Variable cost              $23.35

Price = $32.50

Contribution Margin  = Selling price - Variable cost

Contribution Margin = $32.50 - $23.35 = $9.15