Schister Systems uses the following data in its Cost-Volume-Profit analyses: What is total contribution margin if sales volume increases by 20%?
A) $197,500
B) $94,200
C) $237,000
D) $62,800

Question

Schister Systems uses the following data in its Cost-Volume-Profit analyses:  What is total contribution margin if sales volume increases by 20%?
A) $197,500 
B) $94,200 
C) $237,000 
D) $62,800

Quizplus · Accepted Answer

To calculate the total contribution margin, we first need to calculate the contribution margin per unit, which is the selling price per unit minus the variable cost per unit. 
Contribution margin per unit = $22 - $8 = $14 
Next, we need to calculate the total contribution margin. 
Total Contribution Margin = Contribution Margin per unit × Sales Volume 
At the given sales volume of 14,000 units, the total contribution margin is: 
Total Contribution Margin = $14 × 14,000 = $196,000 
If sales volume increases by 20%, the new sales volume will be: 
New Sales Volume = 14,000 × 1.2 = 16,800 units 
The new total contribution margin will be: 
New Total Contribution Margin = $14 × 16,800 = $235,200 
Therefore, the total contribution margin if sales volume increases by 20% is $235,200, which is closest to option C: $237,000.

Schister Systems Uses the Following Data in Its Cost-Volume-Profit Analyses