/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q29PGA Analyzing profitability聽Relativ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 21: Q29PGA (page 1174)

Analyzing profitability

Relative Furniture Company manufactures and sells oak tables and chairs. Price and cost data for the furniture follow:

Tables Chairs

Sales Price \( 1,400 \) 50

Variable manufacturing costs 1,148 21

Sales commission (8%) 112 4

Relative Furniture has three sales representatives: Abe, Brett, and Corrin. Abe sold 50 tables with 4 chairs each. Brett sold 110 tables with 6 chairs each. Corrin sold 90 tables with 8 chairs each.

Requirements:

  1. Calculate the total contribution margin and the contribution margin ratio for each sales representative (round to two decimal places).
  2. Which sales representative has the highest contribution margin ratio? Explain why.

Short Answer

Expert verified
  1. The contribution margin of Abe, Brett, and Corrinis $12,716, $27,894 and $22,912.The contribution margin ratio ofAbe, Brett, and Corrin is 18.11% and 18.08%, and 18.13%respectively.
  2. Abe sales representative has highest contribution margin ration because of appropriate sales-mix.

Step by step solution

01

Calculation of average service revenue per customer, average variable cost per customer, and, average contribution margin per customer (1). 

Particulars

Abe (50 tables and 4 Chairs)

Brett (110 tables and 6 Chairs)

Corrin (90 tables and 8 Chairs)

Sales price

($1,400x50+$50x4) =$70,200

($1,400x110+$50x6) =$154,300

($1,400x90+$50x8) =$126,400

Variable cost

($1,148x50+$21x4) =$57,484

($1,148x110+$21x6) =$126,406

($1,148x90+$21x8) =$103,488

Contribution Margin

$12,716

$27,894

$22,912

Contribution margin ratio (Contribution margin/Sales)

$12,716/$70,200 =18.11%

$27,894/$154,300 =18.08%

$22,912/$126,400 =18.13%

02

Reason forthe difference in the contribution margin ratio between sales representatives (2):

Abe has the highest contribution margin ratio because of the appropriate sales mix.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Preparing variable and absorption costing income statements Linda鈥檚 Foods produces frozen meals that it sells for \(7 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Linda鈥檚 Foods鈥檚 first month in business:

January 2018

Units produced and sold:

Sales 1,000 meals

Production 1,200 meals

Variable manufacturing cost per meal \) 3

Sales commission cost per meal 1

Total fixed manufacturing overhead 660

Total fixed selling and administrative costs 500

Requirements:

  1. Compute the product cost per meal produced under absorption costing and under variable costing.
  2. Prepare income statements for January 2018 using: a. absorption costing. b. variable costing.
  3. Is operating income higher under absorption costing or variable costing in January?

Computing absorption cost per unit and variable cost per unit

Adamson, Inc. has the following cost data for Product X:

Direct materials $ 41 per unit Direct labor 57 per unit Variable manufacturing overhead 7 per unit Fixed manufacturing overhead 20,000 per year

Calculate the unit product cost using absorption costing and variable costing when production is 2,000 units, 2,500 units, and 5,000 units.

Calculating contribution margin and operating income, variable costing

Calculate the contribution margin and operating income for June using variable costing.

Use the following information for Short Exercises S21-4 and S21-5.

Dracut Company reports the following information for June:

Net Sales Revenue $ 755,000 Variable Cost of Goods Sold 240,000 Fixed Cost of Goods Sold 198,000 Variable Selling and Administrative Costs 168,000 Fixed Selling and Administrative Costs 79,000

Comparing variable and absorption costing Refer to Exercises E21-16 and E21-17.

Requirements:

  1. Which costing method produces the highest operating income? Explain why.
  2. Which costing method produces the highest April 30 balance in Finished Goods Inventory? Explain why

How can variable costing be used in service companies?
See all solutions

Recommended explanations on Business Studies Textbooks

Sales in Business

Read Explanation

Project Planning & Management

Read Explanation

Public Relations Business Studies

Read Explanation

Managerial Economics

Read Explanation

Human 91影视

Read Explanation

Business Case Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.