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Segmented contribution margin analysis Bon Jager Inc. manufactures and sells devices used in cardiovascular surgery. The company has two salespersons, Dean and Martin. A contribution margin by salesperson report was prepared as follows: Bon Jager Inc. Contribution Margin by Salesperson Dean Martin Sales $400,000 $480,000 Variable cost of goods sold 184,000 264,000 Manufacturing margin 216,000 216,000 Variable promotion expenses 72,000 43,200 Variable sales commission expenses 56,000 67,200 128,000 110,400 Contribution margin 88,000 105,600 Manufacturing margin as a percent of sales (manufacturing margin ratio) 54% 45% Contribution margin ratio 22% 22% Interpret the report, and provide recommendations to die two salespersons for improving profitability.

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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Section
BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 20, Problem 20.3CP
Textbook Problem
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Segmented contribution margin analysis

Bon Jager Inc. manufactures and sells devices used in cardiovascular surgery. The company has two salespersons, Dean and Martin.

A contribution margin by salesperson report was prepared as follows:

Bon Jager Inc. Contribution Margin by Salesperson
Dean Martin
Sales $400,000 $480,000
Variable cost of goods sold 184,000 264,000
Manufacturing margin 216,000 216,000
Variable promotion expenses 72,000 43,200
Variable sales commission expenses 56,000 67,200
128,000 110,400
Contribution margin 88,000 105,600

Manufacturing margin as a percent of sales

(manufacturing margin ratio)

54% 45%
Contribution margin ratio 22% 22%

Interpret the report, and provide recommendations to die two salespersons for improving profitability.

To determine

Contribution Margin

Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.

To Interpret: The report and provide recommendations to the two salespersons for improving profitability.

Explanation of Solution

A below table indicating the contribution margin, manufacturing margin as a percent of sales, variable  promotion expenses as a percent of sales, and variable sales commission expenses as a percent of sales of two salespeople is as follows:

Figure (1)

The two salespeople have the same contribution margin rate, and Martin has higher amount of contribution than Dean. This because of volume of sale is differing from each other. Dean has the selling product with higher manufacturing margin than Martin...

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Financial & Managerial Accounting
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