4) Green Company makes and sells computers and tablets and they are operating at
ID: 2339288 • Letter: 4
Question
4) Green Company makes and sells computers and tablets and they are operating at 100% of capacity. During the year, Green C and 7.000 tablets. The following per unit information is available for the two products: (10 points) ompany sold 10,000 compu ters Sales price Variable cost of goods sold Manufacturing margin Variable selling expense Contribution margin Fixed expenses Income from operations Instructions: a) Prepare a contribution margin by product report. Calculate the $900 $500 400 200 320 240 300 220 contribution margin ratio for each product as a whole percent, rounded to two decimal places b) Which product should the company focus the most on producing and selling?Explanation / Answer
Please note that contribution margin for tablets is wrong. Contribution margin per unit = 500-300= 200-60=140
Products
Computers
Tablets
Sales price
900
500
Number of units sold
10000
7000
Sales revenue (sales price * Number of units sold)
9000000
3500000
Variable cost of goods sold
500
300
Variable selling expense
80
60
Variable cost per unit
580
360
Number of units sold
10000
7000
Total variable cost (variable cost per unit * Number of units sold)
5800000
2520000
Fixed expenses per units
20
20
Number of units sold
10000
7000
Total fixed cost
200000
140000
Green company
Contribution margin statements
Products
Computers
Tablets
Total
Sales revenue
9000000
3500000
12500000
Less: total variable cost
5800000
2520000
8320000
Contribution margin
3200000
980000
4180000
Less: fixed cost
200000
140000
340000
Income from operation
3000000
840000
3840000
Contribution margin
3200000
980000
4180000
Sales revenue
9000000
3500000
12500000
Contribution margin ratio (Contribution margin / Sales revenue)
35.56%
28.00%
33.44%
Contribution margin ratio (rounded to whole percentage)
36%
28%
33%
Company should more focus on producing and selling of computers because Contribution margin ratio of computer is higher than Tablets.
Please note that contribution margin for tablets is wrong. Contribution margin per unit = 500-300= 200-60=140
Products
Computers
Tablets
Sales price
900
500
Number of units sold
10000
7000
Sales revenue (sales price * Number of units sold)
9000000
3500000
Variable cost of goods sold
500
300
Variable selling expense
80
60
Variable cost per unit
580
360
Number of units sold
10000
7000
Total variable cost (variable cost per unit * Number of units sold)
5800000
2520000
Fixed expenses per units
20
20
Number of units sold
10000
7000
Total fixed cost
200000
140000
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