*Computed on the basis of sales dollars. Since the start of development work on the Wireless Wizard, advances in technology have altered the m and management now believes that the company can introduce only one of the two models. Consultants fact not too long ago, with Johnson and Gomez paying $35,100 for an in-depth market study. Sales salari commission) will be $88,500 no matter which product is sold. The marketing and advertising costs indica product are incurred only if that product is sold. Other fixed overhead is expected to be the same, regard product is introduced. Required: 1. Compute the unit contribution margin for both models. (Round your answers to 2 decimal places.) Basic Enhanced Unit contribution margin
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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