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Abc Paper

In: Business and Management

Submitted By rogerpaper
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Abc company

Mendel Paper Company
Contribution Margin by Product Line
Computer Paper
Contribution Margin = Selling Price - Variable Cost
CM = $14 - $6 = $8.00 per unit.
Total contribution margin = $8.00 x 30,000 units = $240,000
Napkins
Contribution Margin = Selling Price - Variable Cost
CM = $7 - $4.50 = $2.50 per unit.
Total contribution margin = $2.50 x 120,000 units = $300,000
Place Mats
Contribution Margin = Selling Price - Variable Cost
CM = $12 - $3.60 = $8.40 per unit.
Total contribution margin = $8.40 x 45,000 units = $378,000
Poster Board
Contribution Margin = Selling Price - Variable Cost
CM = $8.50 - $2.50 = $6.00 per unit.
Total contribution margin = $6.00 x 80,000 units = $480,000 Total contribution margin for Poster boards are higher for Mendel paper Company, which is reflected by the controlled variable costs and material costs, whereas, they also have a higher number of sales as well.

Contribution Margin with revisions
Computer Paper
Contribution Margin = Selling Price - Variable Cost
CM = $14 - $9 = $5.00 per unit.
Total contribution margin = $5.00 x 30,000 units = $150,000
Napkins
Contribution Margin = Selling Price - Variable Cost
CM = $7 - $6.0 = $1.0 per unit.
Total contribution margin = $1.0 x 120,000 units = $120,000
Place Mats
Contribution Margin = Selling Price - Variable Cost
CM = $12 - $12 = $0 per unit.
Total contribution margin = $0 x 45,000 units = $0
Poster Board
Contribution Margin = Selling Price - Variable Cost
CM = $8.50 - $8.00 = $0.50 per unit.
Total contribution margin = $0.50 x 80,000 units = $40,000 As the contribution margin is decreased with the increase in the corresponding variable overheads, which are now based on the machine hours, have reduced the overall contribution margin considerably. Computer papers now give the most total contribution margin, whereas, the…...

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