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:
€œIt 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.

Transcribed Image Text:

Difference- Increase or (Decrease) Actual Planned 2277000 $20700 $207000 Less: Variable cost ofgoods sold Variable selling and administrative expenses....... 828,000 540,000 288,000 34,500 30,000 Per unit: Sales price $66 30 24 S69 Variable selling and administrative expenses