Ask Question
28 October, 23:28

Digby's product manager is considering lowering the price of the Daft product by $2.50 and wants to know what the impact will be on the product's contribution margin. Assuming no inventory carry costs, what will Daft's contribution margin be if the price is lowered?

+4
Answers (1)
  1. 29 October, 01:10
    0
    D. 34.00%

    Explanation:

    The computation of the new contribution margin is shown below:

    As we know that

    Contribution Margin = Net Sales Revenue - Variable Expenses

    where,

    Net sales revenue is

    = 604 units * $32.5

    = $19,630

    The variable expense = Total material cost + total labor cost

    Total Material Cost = 604 units * $14.36 = $8,673.44

    Total Labor Cost = 604 units * $7.09 = $4,282.36

    So, the variable expense is

    = $8,673.44 + $4,282.36

    = $12,955.8

    Now

    Contribution margin = $19,630 - $12,955.8 = $6,674.2

    And,

    Contribution margin ratio = Contribution margin : net sales

    So, Contribution margin = $6,674.2 : $19,630

    = 34.00%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Digby's product manager is considering lowering the price of the Daft product by $2.50 and wants to know what the impact will be on the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers