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LekaFEV [45]
3 years ago
11

Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's nor

mal activity level of 40,000 units per month is as follows:Direct materials $ 43.8Direct labor $ 10.4Variable manufacturing overhead $ 1.9Fixed manufacturing overhead $ 26.0Variable selling & administrative expense $ 2.4Fixed selling & administrative expense $ 13.8The normal selling price of the product is $104.4 per unit.An order has been received from an overseas customer for 1,650 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.8 less per unit on this order than on normal sales.Direct labor is a variable cost in this company.What is the contribution margin per unit on normal sales?
Business
1 answer:
Over [174]3 years ago
5 0

Answer:

Contribution margin per unit = $45.90

Contribution margin as sales percentage = 43.97%

Explanation:

As for the information provided we have,

Normal Sales = Normal sales per month, before the overseas order.

For such normal sales, the cost and sales data has been provided,

Selling price per unit = $104.40

Variable costs = Direct material + Direct Labor + Variable Manufacturing + Variable selling & Administrative

= $43.80 + $10.40 + $1.90 + $2.40 = $58.50

Contribution margin per unit = Selling price - Variable cost per unit = $104.40 - $58.50 = $45.90

Contribution margin as sales percentage = \frac{45.90}{104.40} \times 100 = 43.97%

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Toxemia Salsa Corporation manufactures five flavors of salsa. Last year, Toxemia generated net operating income of $40,000. The
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Answer:

We should discontinue Wimpy and we will be saving $2,000 as addition to the Net Margin.

Fixed Expenses will be incurred whether we produce or not, thus the deciding factor is a segment being able to generate a positive Contribution Margin.

By discontinuing Wimpy the allocated Fixed Expense will go up to $12,500 Per active unit from $10,000. Although Wimpy will yet retain its Fixed Expense.

Explanation:

Toxemia Salsa Corporation

<u>Segment Review</u>

A.

Wimpy

Contribution Margin = -$2,000

Less Fixed Expense = -$14,000

Segment Margin = -$16,000

Less Allocated Fixed Expense = -$10,000

Net Segment Margin = -$26,000

B.

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Contribution Margin = $45,000

Less Fixed Expense = -$50,000

Segment Margin = -$5,000

Less Allocated Fixed Expense = -$10,000

Net Segment Margin = -$15,000

C.

Medium

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Less Fixed Expense = -$28,000

Segment Margin = $7,000

Less Allocated Fixed Expense = -$10,000

Net Segment Margin = -$3,000

D.

Hot

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Less Fixed Expense = -$40,000

Segment Margin = $10,000

Less Allocated Fixed Expense = -$10,000

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E.

Hot

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Less Fixed Expense = -$68,000

Segment Margin = $94,000

Less Allocated Fixed Expense = -$10,000

Net Segment Margin = -$84,000

F.

Total of flavors

Contribution Margin = $290,000

Less Fixed Expense = -$200,000

Segment Margin = $90,000

Less Allocated Fixed Expense = -$50,000

Net Segment Margin = $40,000

<u>Benchmark of Flavors</u>

If we stop to produce Wimpy we would save $2,000 assuming we will yet incur the segment Fixed Expense of $14,000 in any case (decision: Discontinue)

If we stop to produce Mild we would lose $45,000 assuming we will yet incur the segment Fixed Expense of $50,000 in any case (decision: Continue)

If we stop to produce Medium we would lose $35,000 assuming we will yet incur the segment Fixed Expense of $28,000 in any case (decision: Continue)

If we stop to produce Hot we would lose $50,000 assuming we will yet incur the segment Fixed Expense of $40,000 in any case (decision: Continue)

If we stop to produce Atomic we would lose $162,000 assuming we will yet incur the segment Fixed Expense of $68,000 in any case (decision: Continue)

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