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Vladimir79 [104]
2 years ago
10

The Stan Company manufactures a product that is expected to incur $ 60 per unit in variable production costs and sell for $ 150

per unit. The sales commission is 5​% of the sales price. Due to intense​ competition, Stan actually sold 200 units for $ 125 per unit. The actual variable production costs incurred were $ 75.00 per unit. Calculate the total contribution margin and contribution margin ratio at the expected​ price/costs and the actual​ price/costs. How might management use this​ information?
Business
1 answer:
stealth61 [152]2 years ago
3 0

Answer:

Contribution margin at expected price is $16,500

Contribution margin ratio at expected price is 55%

Contribution margin at actual price is $8,750

Contribution margin ratio at actual price is 35%

Explanation:

Given:

Sales = 200 units

Expected selling price = $150

Total expected sales = 200×150 = $30,000

Variable cost:

Expected Production cost = 60×200 = $12,000

Sales commission = 0.05×30,000 = $1,500

Total variable cost = 12,000 + 1500

                               = $13,500

Expected contribution margin = Sales - variable cost

                                                  = 30,000 - 13,500

                                                  = $16,500

Expected contribution margin = \frac{Contribution\ margin}{Sales} \times 100

                                                  = \frac{16,500}{30,000} \times100

                                                  = 55%

Calculation of contribution margin at actual price:

Given:

Sales = 200 units

Expected selling price = $125

Total expected sales = 200×125 = $25,000

Variable cost:

Expected Production cost = 75×200 = $15,000

Sales commission = 0.05×25,000 = $1,250

Total variable cost = 15,000 + 1250

                               = $16,250

Expected contribution margin = Sales - variable cost

                                                  = 25,000 - 16,250

                                                  = $8,750

Expected contribution margin = \frac{Contribution\ margin}{Sales} \times 100

                                                  = \frac{8,750}{25,000} \times100

                                                  = 35%

There is is significant variation between contribution margin and contribution margin ratio in the above cases. Management should essentially analyze the reasons for variation in the expected and actual variable production costs. In case the company is not able to increase its contribution margin, it should think about discontinuing the product. Management should also evaluate its product profitability prediction methods as they were not effective in predicting costs causing such massive variations.

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Prepare income statements based on variable costing for each of the 2 years. 2.Prepare income statements based on absorption cos
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Answer:

The question is incomplete, it is missing the accounts and numbers, so I looked for a similar question:

<em>The Rehe Comany sells its razors at $3 per unit. The company uses a first-in, first-out actual costing system. A fixed manufacturing cost rate is computed at the end of each year by dividing the actual fixed manufacturing costs by the actual production units. The following data are related to its first two years of operation: </em>

<em>                    2011 2012 </em>

<em>Sales 1000 units  1200 units </em>

<em>Costs: </em>

<em>Variable manufacturing  700 500</em>

<em>Fixed manufacturing  700 700</em>

<em>Variable operating (marketing) 1000 1200 </em>

<em>Fixed operating (marketing)  400 400</em>

<em />

                                                           2011                  2012

Sales                                               1000 units         1200 units

Production                                          1400                  1000  

Costs:  

Variable manufacturing                      $700               $500

per unit $0.50

Fixed manufacturing                           $700               $700

Variable operating (marketing)         $1000             $1200

Fixed operating (marketing)               $400               $400

cogs under absorption costing 2011 = ($1,400 / 1,400) x 1,000 = $1,000

cogs under absorption costing 2012 = $400 + ($1,200 / 1,000) x 800 = $1,360

1.                                    INCOME STATEMENTS

                                      VARIABLE COSTING

                                                             2011                    2012

Total sales revenue:                        $3,000                $3,600            

Opening inventory:                               ($0)                 ($200)

Variable manufacturing:                   ($700)                 ($500)

<u>Ending inventory:                               $200                   $100 </u>

Gross contribution margin:             $2,500               $3,000

<u>Variable operating:                         ($1,000)              ($1,200)</u>  <u> </u>

Contribution margin:                        $1,500                $1,800  

Fixed manufacturing:                         ($700)                ($700)

<u>Fixed operating:                                ($400)                ($400) </u>

Net operating income:                       $400                  $700

2.                                   INCOME STATEMENTS

                                   ABSORPTION COSTING

                                                             2011                    2012

Total sales revenue:                        $3,000                $3,600            

<u>COGS:                                             ($1,000)                ($1,360) </u>

Gross margin:                                  $2,000                $2,240

<u>Operating costs:                             ($1,400)               ($1,600) </u>

Net operating income:                       $600                   $640

3. Under variable costing, closing inventory = 400 units x $0.50 (variable production costs per unit) = $200.

Under absorption costing, closing inventory = 400 units x $1 (production cost per unit) = $400

Since closing inventory is $200 higher under absorption costing, then net operating income during 2011 increases by $200.

4. a) Variable costing is more likely to result in inventory buildups. Since variable costing determines the value of closing inventory only using variable manufacturing costs, their value is much lower. E.g. in this case the value of closing inventory 2011 under variable costing is $200, while under absorption costing it is $400. This means that less costs are transferred from one year to another.

b) Cost of goods sold must include all production costs (both variable and fixed). This way COGS costs cannot be over estimated during one year and under estimated the next.

<em> </em>

<em />

3 0
3 years ago
The standard deviation of a portfolio consisting of 30% of Stock X and 70% of Stock Y is:
andrew-mc [135]

Answer:

The portfolio SD is A. 20.65%

Explanation:

The standard deviation tells the total risk (both systematic and unsystematic) associated with a stock or a portfolio. The portfolio risk or the standard deviation of portfolio can be calculated using the following formula as attached in the picture below.

Using this formula, the standard deviation of the portfolio is:

SDp = √(0.3)² * (0.2)² + (0.7)² * (0.25)² + 2 * (0.3)*(0.7) * 0.4 * (0.2)*(0.25)

Portfolio SD = 0.20645 or 20.645% rounded off to 20.65%

5 0
2 years ago
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Georgia [21]

Answer:

U.S. Tax Burden on Cola:

The amount of the tax on a case of cola is $4 per case. Of this amount, the burden that falls on consumers is $1 per case, and the burden that falls on producers is ___$3______ per case.

The effect of the tax on the quantity sold would have been larger if the tax had been levied on consumers.

a. True

b. False

Explanation:

The tax burden on consumers, which is represented by the difference in the price of cola from $5 to $6 per unit is $1 ($6 - $5).  However, the cash received by producers reduced by $3 from $5  to $2.  This shows that the total tax burden on both consumers and producers is $4 ($1 + $3).

This represents a total tax burden of $4 or about 67% based on the new selling price of cola or 80% based on the old selling price of cola.

"The effect of the tax on the quantity sold would have been larger if the tax had been levied on consumers alone.   This because the price of cola would have increased to $9 per unit.  Since the demand for cola in this instance is elastic, this change in price would have caused a more than 80% change in the quantity demanded.

4 0
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labwork [276]

NEC arose to:

d.standardize equipment use as a marketing tool

Explanation:

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It was started in the 60s as Nippon Electric company ltd. but it re branded itself to name NEC in 1983.

It is responsible for the standardization of equipment as their USP and their prime marketing tool and made it a standard industry practice to do so as of now.

Their impact on the whole industry has been immense.

7 0
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Angelina_Jolie [31]

Answer:

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3 0
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