Costello Industries Inc. manufactures only one product. For the year ended December 31, 2012, the contribution margin
Question:
Costello Industries Inc. manufactures only one product. For the year ended December 31, 2012, the contribution margin increased by $19,800 from the planned level of $888,800. The president of Costello industries Inc. has expressed some concern about such a small increase and has requested a follow-up report.
The following data have been gathered from the accounting records for the year ended December 31, 2012:
Instruction:
1. Prepare a contribution margin analysis report for the year ended Dec. 31, 2012.
2. At a meeting of the board of directors on Jan. 30, 2013 , the president, after reviewing the contribution margin analysis report, made the following comment:
It looks as if the price increase of 15 dollars had the effect of decreasing sales volum. 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 expense and get them under control. Also let?s consider increasing the sales price to $130and continue this favorable tradeoff, between higher price and lower volume.
Do you agree with the president?s comment? Explain
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter