L. Farrah 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 L. Farrah 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:

Financial Categories		Actual	Planned	Difference
Sales		$ 30,000,000	$ 28,600,000	$ 1,400,000.00
Variable costs:
Variable cost of goods sold		$ 21,600,000	$ 21,450,000	$ 150,000
Variable selling and admin expenses		$ 2,640,000	$ 1,950,000	$ 690,000
Total variable costs		$ 24,240,000	$ 23,400,000	$ 840,000
Contribution Margin		$ 5,760,000	$ 5,200,000	$ 560,000
Number of units sold		120,000	130,000
Per unit
Sales price		$ 250	$ 220
Variable cost of goods sold		$ 180	$ 165
Variable selling and admin expenses		$ 22	$ 15

Prepare a contribution margin analysis report for the year ended December 31.

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.