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Per Unit K707 G582 78 S 44 Sales price 27 19 Variable costs 51 $ 25 Contribution margin 65.4% 56.8% Contribution margin ratio %24 %24

Per Unit K707 G582 78 S 44 Sales price 27 19 Variable costs 51 $ 25 Contribution margin 65.4% 56.8% Contribution margin ratio %24 %24

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Per Unit Analysis** | | K707 | G582 | |-------------------|------|------| | **Sales Price** | $78 | $44 | | **Variable Costs**| $27 | $19 | | **Contribution Margin** | $51 | $25 | | **Contribution Margin Ratio** | 65.4% | 56.8% | **Explanation of Terms:** - **Sales Price:** The amount at which each unit is sold. - **Variable Costs:** Costs that vary with the production level. These are the direct costs attributable to each unit. - **Contribution Margin:** Calculated as Sales Price minus Variable Costs. It represents the portion of sales that contributes to covering the fixed costs and generating profit. - **Contribution Margin Ratio:** Expressed as a percentage, this ratio indicates how much of each dollar of sales contributes to cover fixed costs and profit after variable costs are met. This table provides a clear financial analysis of products K707 and G582, showing how efficiently each product is generating profit above its variable cost.
Transcribed Image Text:**Per Unit Analysis** | | K707 | G582 | |-------------------|------|------| | **Sales Price** | $78 | $44 | | **Variable Costs**| $27 | $19 | | **Contribution Margin** | $51 | $25 | | **Contribution Margin Ratio** | 65.4% | 56.8% | **Explanation of Terms:** - **Sales Price:** The amount at which each unit is sold. - **Variable Costs:** Costs that vary with the production level. These are the direct costs attributable to each unit. - **Contribution Margin:** Calculated as Sales Price minus Variable Costs. It represents the portion of sales that contributes to covering the fixed costs and generating profit. - **Contribution Margin Ratio:** Expressed as a percentage, this ratio indicates how much of each dollar of sales contributes to cover fixed costs and profit after variable costs are met. This table provides a clear financial analysis of products K707 and G582, showing how efficiently each product is generating profit above its variable cost.
**Requirement 3: Analysis for Division C's Product Lines** Division C also produces two product lines. Because the division can sell all of the products it can produce, Dennison is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: - **Click the icon to view the Division C product data.** After expansion, the factory will have a production capacity of 4,300 machine hours per month. The plant can manufacture either 28 units of K707s or 65 units of G582s per machine hour. **3a. Identify the constraining factor for Division C.** Division C's constraining factor is **machine hours**. **3b. Prepare an analysis to show which product line to emphasize.** | | K707 | G582 | |---------|------|------| | **Contribution margin per** | | | **Instructions:** To decide which product line to emphasize, consider how to best utilize the available machine hours based on the contribution margin per product. Calculate and compare the respective contribution margins.
Transcribed Image Text:**Requirement 3: Analysis for Division C's Product Lines** Division C also produces two product lines. Because the division can sell all of the products it can produce, Dennison is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: - **Click the icon to view the Division C product data.** After expansion, the factory will have a production capacity of 4,300 machine hours per month. The plant can manufacture either 28 units of K707s or 65 units of G582s per machine hour. **3a. Identify the constraining factor for Division C.** Division C's constraining factor is **machine hours**. **3b. Prepare an analysis to show which product line to emphasize.** | | K707 | G582 | |---------|------|------| | **Contribution margin per** | | | **Instructions:** To decide which product line to emphasize, consider how to best utilize the available machine hours based on the contribution margin per product. Calculate and compare the respective contribution margins.
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