Question
Sweet Dreams sells pillows for $25 per unit. Each pillow currently incurs a variable cost per unit of $14. Sweet Dreams has developed a plan
Sweet Dreams sells pillows for $25 per unit. Each pillow currently incurs a variable cost per unit of $14. Sweet Dreams has developed a plan to improve customer satisfaction by using higher quality direct materials. The change in materials will increase the variable cost per unit to $19. What is the change in the contribution margin per unit caused by the change in materials? Multiple choice question.
a.Decrease of $5 per unit
b.Increase of $6 per unit
c.Decrease of $11 per unit
d.The contribution margin per unit will not be affected by the change in materials.
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