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1. Soles quantity factor 512.200,000) PR 20-6A Contribution margin analysis Obj. 5 Farr Industries Inc, manufactures only one product. For the year ended December 31. the contribution margin increased by $560,000 from the planned level of $5,200,000. The presi- dent of Farr Industries Inc. has expressed concern about such a small increase in contribution margin and has requested a follow-up report. ERCE TEMPLATE Chapter 20 Variodu The following data have been gathered from the accounting records for the year ended December 31: Difference- Increase Actual Planned (Decrease) $30,000,000 $ 28,600,000 $1,400,000 Sales .. Variable costs: $21,600,000 $ 21,450,000 $ 150,000 2,640,000 1,950,000 690.000 $24,240,000 $23,400,000 $ 840,000 $ 560,000 $ 5,200,000 $ 5,760,000 120,000 130,000 $250 Variable cost of goods sold.. Variable selling and administrative expenses Total variable costs. Contribution margin ... Number of units sold ..... Per unit: Sales price...... Variable cost of goods sold..... Variable selling and administrative expenses $220 165 15 180 22 Instructions 1. Prepare a contribution margin analysis report for the year ended December 31 At a meeting of the board of directors on January 30 the board of directors on January 30, the president, after review- ing the contribution margin analysis report, made the following comment: It looks as if the price increase of $30 had the effect or increasing sales. However, this was a trade-offs decreased. Also, variable cost of goods sold per unit increased by $15 more than planned. The variable salle administrative expenses appear out of control. They increased by $7 per unit more than was planned, who crease of over 47% more than was planned. Let's look into these expenses and get them under controlla Sider increasing the sales price to $275 and continue this favorable trade-off between higher price and low It looks as if the price increase of goods sold per they increased by $7 per unit more than under controll Also, let's con it more than was planned, which is an in- decreased. Also, variable cost or out of control. They incre these expenses and get them under controlAls hle trade-off between higher price and lower volume. Do you agree with the president's comment? Explain. Obj. 1, 2 T unel

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