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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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