Instructions 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: Difference- Actual Planned Increase (Decrease) 1 Sales $30.000,000.00 $28.600,000.00 $1.400.000.00 Variable costs Variable cost of goods sold $21.600,000.00 $21.450,000.00 $150,000.00 Variable seling and administrative experises 2.640,000.00 1950.000.00 690,000.00 Total variable costs $24,240,000.00 $23.400,000.00 $840,000.00 Contribution margin $5,760.000.00 $5.200.000.00 $560,000.00 Instructions 7 Contribution margin $5,760,000.00 $5,200,000.00 $560,000.00 sNumber of units sold 120,000.00 130,000,00 9 Per unit so Sales price $250.00 $220.00 Variable cost of qoods sold 11 180.00 165.00 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 baxes in which you must enter subtracted or negative numbers use a minus sign 2 Al a meeting of the board of directors on January 30, the president after reviewing the contribution margin analysis report, made the following comment t looks as f the price increase of $30 had the effect of increasing sales However this was a trade-off since sales volume decreased Also 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 seling and administrative expenses appear out of control They increased by $7 per unit more than was planed, which is an increase of over 47 % more than was planned. Let's look into these expenses and get them under controll Also, let's consider increasing the sales price to $275 and continue this favorable trade-off between higher price and lower volume." Do you agree with the president's comment? Explain Labels and Amount Descriptions Labels Effect of changes in sales Effect of changes in selling and administrative expenses Effect of changes in variable cost of goods sold For the Year Ended December 31 Amount Descriptions Actual contribution margin Contribution margin ratio Gross profit Planned contribution margin Sales mix Sales quantity factor Total effect of changes in sales Total effect of changes in selling and administrative expenses Labels and Amount Descriptions For the Year Ended December 31 Amount Descriptions Actual contribution margin Contribution margin ratio Gross profit Planned contribution margin Sales mix Sales quantity factor Total effect of changes in sales Total effect of changes in selling and administrative expenses Total effect of changes in variable cost of goods sold Unit cost factor Unit price factor Variable cost quantity factor Labels and Amount Descriptions Contribution Margin Analysis Shaded cells have feedback 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
