Survey of Accounting (Accounting I)
Solutions
Survey of Accounting (Accounting I)
Contribution margin per constraint
Using the data and your answers from MBA 12-2, determine the following:
Assuming the selling price for Mirror glass cannot be changed, how much will the variable costs for Mirror glass need to be reduced so it is as profitable as Regular glass.
Concept Introduction:
Cost Volume Profit (CVP) Analysis:
The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.
Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones.
The formula for contribution margin is as follows:
Contribution margin = Sales - Variable cost.
Similarly contribution margin ratio = Contribution/sales
To Calculate:
The Selling price to make the product profitable
The Selling price to make the product profitable is calculated as follows:
| Variable Cost per unit (A) | $ 50.00 |
| Desired Profit per unit (B) (240000/20000) | $ 12... |
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