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Dmitriy789 [7]
3 years ago
15

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
Business
1 answer:
Akimi4 [234]3 years ago
4 0

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                       <u>$2.50</u>

Total Variable cost              <u>$23.35</u>

Price = $32.50

Contribution Margin  = Selling price - Variable cost

Contribution Margin = $32.50 - $23.35 = $9.15

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In order to overcome this gap, the contractionary fiscal policy must be considered. The mechanism of that policy is to increase the taxes decrease the government expenses due to inflationary pressures. This policy consequently will affect the level of consumption and private investment, respectively, these also will decrease the real GDP.

Other concept of macroeconomics is recessionary gap. In comparison to inflationary gap, this concept indicates the economy operating at lower level than its full equilibrium level, in turn, the level of real GDP is also less than full equilibrium level. We used to see this situation when the economy was intending to recess.

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