Asked by IRINA FEIJOO CALVAO on Apr 26, 2024
Verified
Schister Systems uses the following data in its Cost-Volume-Profit analyses: What is total contribution margin if sales volume increases by 20%?
A) $197,500
B) $94,200
C) $237,000
D) $62,800
Total Contribution Margin
The difference between total sales revenue and total variable costs, indicating how much revenue is available to cover fixed costs and generate profit.
- Understand the principles of Cost-Volume-Profit analysis and its visual depiction.
- Comprehend the impact of alterations in pricing and costs on contribution margins and the points of break-even.
Verified Answer
DS
Dhannya SojanApr 28, 2024
Final Answer :
C
Explanation :
To calculate the total contribution margin, we first need to calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit.
Contribution margin per unit = $22 - $8 = $14
Next, we need to calculate the total contribution margin.
Total Contribution Margin = Contribution Margin per unit × Sales Volume
At the given sales volume of 14,000 units, the total contribution margin is:
Total Contribution Margin = $14 × 14,000 = $196,000
If sales volume increases by 20%, the new sales volume will be:
New Sales Volume = 14,000 × 1.2 = 16,800 units
The new total contribution margin will be:
New Total Contribution Margin = $14 × 16,800 = $235,200
Therefore, the total contribution margin if sales volume increases by 20% is $235,200, which is closest to option C: $237,000.
Contribution margin per unit = $22 - $8 = $14
Next, we need to calculate the total contribution margin.
Total Contribution Margin = Contribution Margin per unit × Sales Volume
At the given sales volume of 14,000 units, the total contribution margin is:
Total Contribution Margin = $14 × 14,000 = $196,000
If sales volume increases by 20%, the new sales volume will be:
New Sales Volume = 14,000 × 1.2 = 16,800 units
The new total contribution margin will be:
New Total Contribution Margin = $14 × 16,800 = $235,200
Therefore, the total contribution margin if sales volume increases by 20% is $235,200, which is closest to option C: $237,000.
Learning Objectives
- Understand the principles of Cost-Volume-Profit analysis and its visual depiction.
- Comprehend the impact of alterations in pricing and costs on contribution margins and the points of break-even.
Related questions
Which of the Following Statements Is Correct with Regard to ...
In a Cost-Volume-Profit Graph (Sometimes Called a Break-Even Chart), Unit ...
In a Cost-Volume-Profit Graph, the Anticipated Profit or Loss at ...
On a Cost-Volume-Profit Graph for a Profitable Company, the Total ...
The Degree of Operating Leverage in a Company Is Smallest ...