Plymouth Industries incurs the following costs during the current year: Sales for the year were $80,000 and Plymouth 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. Plymouth sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Plymouth
Industries.
(b) Plymouth Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Question

Plymouth Industries incurs the following costs during the current year:  Sales for the year were $80,000 and Plymouth 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. Plymouth sold 400 units.
(a) Calculate the unit contribution margin and the contribution margin ratio for Plymouth
Industries.
(b) Plymouth Industries is considering plans that would increase the contribution margin ratio for next year. Should it pursue these plans? Explain.

Plymouth Industries Incurs the Following Costs During the Current Year