Vogel Co. produces three models of heating and air conditioning thermostat compo

Question

Vogel Co. produces three models of heating and air conditioning thermostat components. The following table summarizes data about each model:

BV19 HV41 MV12
Selling price per unit $ 36 $ 60 $ 30
Contribution margin per unit 12 18 6
Units sold per month 4,000 2,000 6,000

Total contribution margin $ 48,000 $ 36,000 $ 36,000
Direct fixed expenses 21,600 17,100 24,300

Segment margin $ 26,400 $ 18,900 $ 11,700
Allocated company fixed expenses 10,000 5,000 15,000

Operating income (loss) $ 16,400 $ 13,900 $ (3,300 )


Required:

(a)


On what basis does the $30,000 of company fixed expenses appear to be allocated?




(b)


Calculate the effect on total company net income if the MV12 model were discontinued. (Omit the "$" sign in your response.)

The net income would by $


(c)


Calculate the contribution margin ratio for each model. (Round your answers to 1 decimal place. Omit the "%" sign in your response.)

BV19 HV41 MV12
Contribution margin ratio % %

Explanation / Answer

a) Profit Margin(Sum of Segment Margins) - Total Operating Income
= (26,400 + 18,900 + 11,700) - (16,600 + 13,900 + 3,300)
= $ 30,000

b) (26,400 + 18,900) - (10,000 + 5,000) = $ 30,300

c) Contribution margin ratio for BV19 = (12/36) = 33.3

Contribution margin ratio for HV41 = (18/60) = 30

Contribution margin ratio for MV12 = (6/30) = 20

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