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The following information exists for ABC Company:

Selling price per unit: $30
Variable expenses per unit: $21
Fixed expenses for the period: $60,000
Sales volume in units: 10,000

If selling price is reduced by $2 and sales volume increases by 3,000 units, total contribution margin will increase by $__________ .

Sagot :

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Answer:

Difference= $1,000 increase

Explanation:

Giving the following information:

Selling price per unit: $30

Variable expenses per unit: $21

New selling price= 30 - 2= $28

New units sales= 13,000

First, we need to calculate the current contribution margin:

Total contribution margin= units sold*unitary contribution margin

Total contribution margin= 10,000*(30 - 21)

Total contribution margin= $90,000

Now, the new contribution margin:

Total contribution margin= 13,000*(28 - 21)

Total contribution margin= $91,000

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