Farr industries inc manufactures only one product. For the year ended Dec31, the contribution margin increased by
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Farr industries inc manufactures only one product. For the year ended Dec31, the contribution margin increased by $52690 from the planned level of $1278320. the president of company expressed concern about such a small contribution margin and requested a follow-up report.
The following data has been gathered from the accounting records of the year ended Dec 31:
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1 Sales 3 Variable costs 4 Variable cost of goods sold s Variable selling and administrative expenses Total variable costs 6 7 Contribution margin Number of units sold Per unit 9 10 Sales price 11 Variable cost of goods sold 12 Variable selling and administrative expenses Actual $2,777,760.00 Planned $144.00 57.00 18.00 $2,755,000.00 $1,099,550.00 $1,168,120.00 347,220.00 308,560.00 $1,446,750.00 $1,476,680.00 $1,331,010.00 $1,278,320.00 19,290.00 22,040.00 $125.00 53.00 14.00 Difference- Increase (Decrease) $22,760.00 $(68,590.00) 38,660.00 $(29,930.00) $52,690.00 Required: 1. Prepare a contribution margin analysis report for the year ended December 31. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign. 2. 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 $19 had the effect of decreasing sales volume. However, this was a favorable tradeoff The variable cost of goods sold was less than planned. Apparently, we are efficiently managing our variable cost of goods sold However, the variable selling and administrative expenses appear out of control. Let's look into these expenses and get them under control! Also, let's consider increasing the sales price to $160 and continue this favorable tradeoff between higher price and lower volume Do you agree with the president's comment? Explain 1 Sales 3 Variable costs 4 Variable cost of goods sold s Variable selling and administrative expenses Total variable costs 6 7 Contribution margin Number of units sold Per unit 9 10 Sales price 11 Variable cost of goods sold 12 Variable selling and administrative expenses Actual $2,777,760.00 Planned $144.00 57.00 18.00 $2,755,000.00 $1,099,550.00 $1,168,120.00 347,220.00 308,560.00 $1,446,750.00 $1,476,680.00 $1,331,010.00 $1,278,320.00 19,290.00 22,040.00 $125.00 53.00 14.00 Difference- Increase (Decrease) $22,760.00 $(68,590.00) 38,660.00 $(29,930.00) $52,690.00 Required: 1. Prepare a contribution margin analysis report for the year ended December 31. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign. 2. 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 $19 had the effect of decreasing sales volume. However, this was a favorable tradeoff The variable cost of goods sold was less than planned. Apparently, we are efficiently managing our variable cost of goods sold However, the variable selling and administrative expenses appear out of control. Let's look into these expenses and get them under control! Also, let's consider increasing the sales price to $160 and continue this favorable tradeoff between higher price and lower volume Do you agree with the president's comment? Explain
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Related Book For
Managerial Accounting
ISBN: 978-1337270595
14th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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