The original plan for 2020 was to sell 80,000 of the TV boards at a price of $200 per unit and 130,000 PC boards at $350 per unit. However, CEB's management group is meeting to discuss how to react to the COVID 19 crisis on the top of the already falling profits, and how to spend the sales and promotion budget to protect if not increase the company's profit during the crisis. They are considering several options and discussing which product mix would result in the highest profits. The sales manager Jason Jackman believes that the market share for the TV board could be expanded by concentrating CEB's promotional efforts in this area. Moreover, due to lockdown the sales of TVs are increasing worldwide, generating more demand for TV boards.

TV boards PC boards

Direct materials $100 $160

Direct labour (hours) 1.7 4.2

Machine time (hours) 0.6 1.9

Direct labour cost is $16 per hour. Variable manufacturing support costs are applied on the basis of direct labour hours. This year's variable manufacturing support costs are budgeted at $2,240,000, and direct labour hours are estimated at 448,000. Other manufacturing support is applied at $12 per machine hour. CEB applies a materials handling charge (in other words, materials support costs) of 12% of direct materials cost; this materials handling charge is not included in variable manufacturing support costs

This section requires you to undertake quantitative analysis on the case. You are to perform calculations (may be presented in the Appendix) that are relevant to the problem and issues that you identified in Section 2. In particular: a) On the basis of standard costs, calculate the total contribution margin and a contribution margin per product expected in 2020 for CEB Corporation's products: the TV board and the PC board. b) On the basis of activity-based costs, calculate the total contribution margin and the contribution margin per unit expected for 2020 for CEB Corporation's two products. c) How would the change of the product mix (if supported by marketing and promotion efforts and assuming that they would be successful) change total profitability of the company?

Other manufacturing support costs Machine insertion $1,800,000 Number of machine insertions Manual insertion $5,000,000 Number of manual insertions Wave soldering $198,000 Number of boards Total $6,998,000 TV boards PC boards Parts 1 5 47 Machine insertions 10 37 Manual insertions 1 19 Machine setups 2 5 Kilogram of waste 0.04 0.70 Inspections 1 3 4,500,000 2,000,000 165 ,000 Materials support costs Procurement $600,000 Number of parts 3,000,000 Production scheduling $330,000 Number of boards 165,000 Packaging/shipping $660,000 Number of boards 165,000 Total costs $1,590,000 Variable support costs Machine setup $669,000 Number of setups 418,125 Hazardous waste disposal $48,000 Kilogram of waste 8,000 Quality control $560,000 Number of inspections 240,000 General supplies $66,000 Number of boards 165,000 Total costs $1,343,000