Barcelona Bagpipes produces two models: Model 24 has sales of 200 units with a contribution margin of $35 each; Model 26 has sales of 75 units with a contribution margin of $37 each.If sales of Model 26 increase by 50 units, how much will profit change?

Question

Quizplus · Accepted Answer

First, calculate the current total contribution margin:
Model 24: 200 units x $35 = $7,000
Model 26: 75 units x $37 = $2,775
Total: $9,775

Next, calculate the new contribution margin if sales of Model 26 increase by 50 units:
Model 24: 200 units x $35 = $7,000
Model 26: (75 units + 50 units) x $37 = $5,850
Total: $12,850

The increase in contribution margin is $12,850 - $9,775 = $3,075. However, this is not the change in profit because we need to consider the fixed costs. Since the problem does not provide fixed costs, we cannot calculate the exact change in profit. However, we can eliminate choices C and D as they suggest much larger increases in profit which would require very high fixed costs. Choice B is close to the correct answer, but it does not take into account the increase in contribution margin from selling an additional 50 units of Model 26. Therefore, the best choice is A, a $1,850 increase in profit.

Barcelona Bagpipes Produces Two Models: Model 24 Has Sales of 200