Dodge Industries incurs the following costs during the current year:
Sales for the year were $80,000 and Dodge Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Dodge
Industries.
(b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Question

Dodge Industries incurs the following costs during the current year:
  Sales for the year were $80,000 and Dodge Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Dodge
Industries.
(b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Quizplus · Accepted Answer

The Answer of Dodge Industries incurs the following costs during the current year:
  Sales for the year were $80,000 and Dodge Industries determined that only the direct production costs (prime costs) and sales commissions are to be classified as variable costs; all other costs are classified as fixed costs. Dodge sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Dodge
Industries.
(b) Dodge Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Dodge Industries Incurs the Following Costs During the Current Year