Chapter 21: Q11SE (page 1168)

Analyzing profitability Refer to Short Exercise S21-10. Which business segment provided the greatest total contribution margin? Which
business segment had the highest contribution margin ratio?
Camden Company has divided its business into segments based on sales territories: East Coast, Midland, and West Coast. Following are financial data for 2018:
East Coast
Midland
West Coast
Units sold
71
69
53
Sales price per unit
$10,300
$13,600
$12,000
Variable cost per unit
6,283
7,072
7,080

Expert verified

Answer

Midland has the highest contribution margin and contribution margin ratio.

Step by step solution

Particulars

East Coast

Midland

West Coast

Net sales revenue (Units sold x Sales price per unit)

71x$10,300 =$731,300

69x$13,600 =$938,400

53x$12,000 =$636,000

Variable cost (Units sold x Variable cost per unit)

71x$6,283 =$446,093

69x$7,072 =$487,968

53x$7,080

=$375,240

As per the above statement, Midland has provided the greatest total contribution margin.

Particulars	East Coast	Midland	West Coast
Net sales revenue	$731,300	$938,400	$636,000
Less: Variable cost	$446,093	$487,968	$375,240
Contribution Margin	$285,207	$450,432	$260,760
Contribution margin ratio (Contribution margin/net sales revenue)	39%	48%	41%