Question

Mathews Company manufactures only one product. For the year ended December 31, 2014, the contribution margin decreased by $ 126,000 from the planned level of $ 540,000. The president of Mathews Company has expressed some concern about this decrease and has requested a follow- up report. The following data have been gathered from the accounting records for the year ended December 31, 2014.


Instructions
1. Prepare a contribution margin analysis report for the year ended December 31, 2014.
2. At a meeting of the board of directors on January 30, 2015, the president, after reviewing the contribution margin analysis report, made the following comment:
“It looks as if the price decrease of $ 3.00 had the effect of increasing sales. However, we lost control over the variable cost of goods sold and variable selling and administrative expenses. Let’s look into these expenses and get them under control! Also, let’s consider decreasing the sales price to $ 60 to increase sales further.” Do you agree with the president’s comment?Explain.


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  • CreatedJune 27, 2014
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