The Children's Company manufactures and sells footballs for kids. Currently, 400,000 units are produced and sold...

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The Children's Company manufactures and sells footballs for kids. Currently, 400,000 units are produced and sold per year at a price of £17.50 per unit. Annual fixed costs are £900,000. Unit variable costs are £12.00. Required: a) Calculate and compare the contribution margin per unit with the total contribution margin. b) What is the difference between contribution margin and gross margin? Which one is more important for decision making in the short-term and the long-term, respectively? c) What is the current operating income? d) The central premise of CVP analysis is that the fixed and variable elements of costs can be accurately identified. Do you agree with this statement? Explain. e) What is the present breakeven point in units and revenues? The Children's Company manufactures and sells footballs for kids. Currently, 400,000 units are produced and sold per year at a price of £17.50 per unit. Annual fixed costs are £900,000. Unit variable costs are £12.00. Required: a) Calculate and compare the contribution margin per unit with the total contribution margin. b) What is the difference between contribution margin and gross margin? Which one is more important for decision making in the short-term and the long-term, respectively? c) What is the current operating income? d) The central premise of CVP analysis is that the fixed and variable elements of costs can be accurately identified. Do you agree with this statement? Explain. e) What is the present breakeven point in units and revenues?

Answer rating: 100% (QA)

a Contribution margin per unit is calculated as the selling price per unit minus the variable cost per unit Contribution Margin per Unit Selling Price ... View the full answer