Contribution margin analysis

Instructions

Labels and Amount Descriptions

Contribution Margin Analysis

Final Question

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Instructions

Dozier Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $39,050 from the planned level of $1,389,150. The president of Dozier Industries Inc. has expressed some concern about such a small increase and has requested a follow-up report.

The following data have been gathered from the accounting records for the year ended December 31:

1		Actual	Planned	Difference Increase (Decrease)
2	Sales	$2,779,200.00	$2,756,250.00	$22,950.00
3	Less:
4	Variable cost of goods sold	$1,061,500.00	$1,124,550.00	$(63,050.00)
5	Variable selling and administrative expenses	289,500.00	242,550.00	46,950.00
6	Total	$1,351,000.00	$1,367,100.00	$(16,100.00)
7	Contribution margin	$1,428,200.00	$1,389,150.00	$39,050.00

	Actual	Planned
Number of units sold	19,300	22,050

Per unit:	Actual	Planned
Sales price	$144	$125
Variable cost of goods sold	55	51
Variable selling and administrative expenses	15	11

Required:

1.

Prepare a contribution margin analysis report for the year ended December 31. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2.

	At a meeting of the board of directors on January 30, the president, after reviewing the contribution margin analysis report, made the following comment:
	It looks as if the price increase of $19 had the effect of decreasing sales volume. However, this was a favorable tradeoff. The variable cost of goods sold was less than planned. Apparently, we are efficiently managing our variable cost of goods sold. However, the variable selling and administrative expenses appear out of control. Lets look into these expenses and get them under control! Also, lets consider increasing the sales price to $160 and continue this favorable tradeoff between higher price and lower volume.
	Do you agree with the presidents comment? Explain.

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Contribution Margin Analysis

1. Prepare a contribution margin analysis report for the year ended December 31. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Dozier Industries Inc.

Contribution Margin Analysis

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