Question

The Staple Company manufactures a product that is expected to incur $ 36 per unit in variable production costs and sell for $ 60 per unit. The sales commission is 10​% of the sales price. Due to intense​ competition, Staple actually sold 200 units for $ 50 per unit. The actual variable production costs incurred were $ 35.00 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?

Answer 1

Expected Real

$12,000 $10,000 Sales

$60 $50 Unit Price

200 200 Quantity

-$7,200 -$7,000 COGS

$36 $35 Unit Cost

-$1.200 -$500 Sales Comission 10%

$3,600 $2,500 Contribution MARGIN

30% 25%

Step-by-step explanation:

The management could use this information to see that with the actual condition of the market the contribution margin

hencefort will bee lower that expected, it's supposed that the costs are operating at their level of efficiency so the only value that it's possible to adjust are the commission paid

but the impact in the Contribution Margin wont be so much and it will have a negative impact in the salesforce.

So the only information usefull here it's that the changes in the market conditions will impact in the future Contribution Margin of the company.