The staple company manufactures a product that is expected to incur $ 36 per unit in variable production costs and sell for $ 60 per unit. the sales commission is 10% of the sales price. due to intense competition, staple actually sold 200 units for $ 50 per unit. the actual variable production costs incurred were $ 35.00 per unit. calculate the total contribution margin and contribution margin ratio at the expected price/costs and the actual price/costs. how might management use this information?

Expected   Real  

$12,000  $10,000   Sales  

$60           $50   Unit Price  

200            200   Quantity  

-$7,200           -$7,000  COGS  

$36            $35   Unit Cost  

-$1.200           -$500   Sales Comission 10%  

$3,600            $2,500   Contribution MARGIN  

30%                   25%  

Explanation:

The management could use this information to see that with the actual condition of the market the contribution margin  

hencefort will bee lower that expected, it's supposed that the costs are operating at their level of efficiency so the only value that it's possible to adjust are the commission paid  

but the impact in the Contribution Margin wont be so much and it will have a negative impact in the salesforce.  

So the only information usefull here it's that the changes in the market conditions will impact in the future Contribution Margin of the company.  

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