Chapter 6, Problem 6.5E

To determine

Concept Introduction:

Contribution approach:

The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.

Requirement 1:

Calculate the contribution margin per minute for all the products.

To determine

Concept Introduction:

Differential analysis:

Differential analysis is an accounting technique that is used to analyze the change in the revenue and cost of the business resulting from some specific decision making. It analyses the cost of accepting one business offer over other business offers.

Requirement 2:

Determine the most profitable product for the plastic injection molding machine.

To determine

Concept Introduction:

Contribution approach:

The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.

Requirement 3:

Calculate the contribution margin per pound for all the products.

To determine

Concept Introduction:

Differential analysis:

Differential analysis is an accounting technique that is used to analyze the change in the revenue and cost of the business resulting from some specific decision making. It analyses the cost of accepting one business offer over other business offers.

Requirement 4:

Determine the most profitable product for the use of the plastic pellet.

To determine

Concept Introduction:

Contribution approach:

The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.

Requirement 5:

Determine the largest contribution margin per unit and explain the reason behind its ineffectiveness use.