Question
eBook Learning Objective 5 Calculator Contribution Margin AnalysisSales Select Audio Inc. sells electronic equipment. Management decided early in the year to reduce the price of
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Learning Objective 5
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Contribution Margin AnalysisSales
Select Audio Inc. sells electronic equipment. Management decided early in the year to reduce the price of the speakers in order to increase sales volume. As a result, for the year ended December 31, the sales increased by $17,700 from the planned level of $941,700. The following information is available from the accounting records for the year ended December 31.
Actual | Planned | Increase or (Decrease) | ||||
Sales | $959,400 | $941,700 | $17,700 | |||
Number of units sold | 24,600 | 21,900 | 2,700 | |||
Sales price | $39 | $43 | $(4) | |||
Variable cost per unit | $7 | $7 | $0 |
a. Prepare an analysis of the sales quantity and unit price factors. Use a minus sign for any negative amounts.
Select Audio Inc. | ||
Contribution Margin AnalysisSales | ||
For the Year Ended December 31 | ||
Effect of changes in sales: | ||
Sales quantity factor | $ | |
Unit price factor | ||
Total effect of changes in sales | $ |
b. Did the price decrease generate sufficient volume to result in a net increase in contribution margin if the actual variable cost per unit was $7, as planned?
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