Question
Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model: BV19HV41MV12Selling Price per unit$ 20$
Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model:
BV19HV41MV12Selling Price per unit$ 20$ 20$ 20Contribution margin per unit362Units sold per month8,0002,00010,000Total contribution margin$24,000$12,000$20,000Direct fixed expenses6,9004,40014,300Segment margin$17,100$7,600$5,700Allocated company fixed expenses8,0002,00010,000Operating income (loss)$9,100$5,600$(4,300)
Required:(a)On what basis does the $20,000 of company fixed expenses appear to be allocated? On what basis does the $17,000 of company fized expenses appear to be allocated? (b)Calculate the effect on total company net income if the MV12 model were discontinued. (Omit the "$" sign in your response.)(c)Calculate the contribution margin ratio for each model.(d)If an advertising campaign focusing on a single model were to result in an increase of 5,000 units in the quantity of units sold, which model should be advertised?(e)If an advertising campaign focusing on a single model were to result in an increase of $32,000 in revenues, which model should be advertised?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started