Orion Company sells several products. Information of average revenue and costs is as follows:

The company sells 12,000 units at the end of the year.
If direct labor and direct material costs increase by $1 each, contribution margin ________.
A) increases by $24,000
B) increases by $12,000
C) decreases by $24,000
D) decreases by $12,000

Question

Orion Company sells several products. Information of average revenue and costs is as follows:

The company sells 12,000 units at the end of the year.
If direct labor and direct material costs increase by $1 each, contribution margin ________.
A) increases by $24,000 
B) increases by $12,000 
C) decreases by $24,000 
D) decreases by $12,000

Quizplus · Accepted Answer

Contribution margin = ($23 - $5 - $2.70 - $0.40 - $2) × 12,000 = $154,800.
The previous contribution margin was $178,800 which means it decreased by $24,000

Orion Company Sells Several Products