Question

Contribution Margin by Segment

The following data are for Moss Creek Apparel:

	East	West
Sales volume (units):
Product XX	8,700	9,700
Product YY	4,300	7,300
Sales price:
Product XX	$18	$16
Product YY	$24	$22
Variable cost per unit:
Product XX	$11	$11
Product YY	$14	$14

a. Determine the contribution margin for Product YY.
$fill in the blank 1

b. Determine the contribution margin for the West Region.
$fill in the blank 2

Answer 1

Contribution margin = Sales -Variable cost

a) Contribution margin for YY = sales units of YY for East x(sales price - variable cost for product YY in East) +sales units of YY for West x(sales price -variable cost for product YY in West)

=4300×($24-$14) +7300×($22-$14)

=$43000+$58400

=$101400

b) Contribution margin for west region =sales unit for XX in West x(sales price - variable cost for product XX in West ) +sales units for YY in West x(sales price - variable cost for product YY in West)

=9700×($16-$11)+7300×($22-$14)

=$48500+$58400

=$106900