Farr Industries Inc. manufactures only one product. For the year ended December 31, the contribution margin increased by $560,000 from the planned level of $5,200,000. The president of Farr Industries Inc. has expressed concern about such a small increase in contribution margin 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	$30,000,000.00	$28,600,000.00	$1,400,000.00
3	Variable costs:
4	Variable cost of goods sold	$21,600,000.00	$21,450,000.00	$150,000.00
5	Variable selling and administrative expenses	2,640,000.00	1,950,000.00	690,000.00
6	Total variable costs	$24,240,000.00	$23,400,000.00	$840,000.00
7	Contribution margin	$5,760,000.00	$5,200,000.00	$560,000.00
8	Number of units sold	120,000.00	130,000.00
9	Per unit:
10	Sales price	$250.00	$220.00
11	Variable cost of goods sold	180.00	165.00
12	Variable selling and administrative expenses	22.00	15.00

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 $30 had the effect of increasing sales. However, this was a trade-off since sales volume decreased. Also, variable cost of goods sold per unit increased by $15 more than planned. The variable selling and administrative expenses appear out of control. They increased by $7 per unit more than was planned, which is an increase of over 47% more than was planned. Lets look into these expenses and get them under control! Also, lets consider increasing the sales price to $275 and continue this favorable trade-off between higher price and lower volume.
	Do you agree with the presidents comment? Explain.