Baldwin company's product best has fixed costs of $100,000, capacity of 10,500 units, sales of 10,000 units, selling price per unit of $25, 1st shift labor costs per unit of $10, and a contribution margin ratio of 60% prior to overtime due to using the second shift. baldwin is considering investing in a marketing program that costs $22,000 and is projected to increase sales volume by 10%. all else constant, if baldwin makes this decision based on a minimum acceptable roi in the first year of 60% for the project, should they invest in this marketing program?
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Ответ:
NO, it's not good to invest in this marketing program.
Explanation:
QuantityUnitTOTALIncome Statement
10,000 $ 25,00$ 250,000Total Net Sales
$ 10,00-$ 100,000Variable Cost
60% $ 150,000Contributing Margin
-$ 100,000Anual Fixed Costs
20% $ 50,000Segment Margin
Under the actual conditions the company generate a contributing margin of 60% and a segment margin of 20%.
Quantity Unit TOTAL Income Statement
11,000 $ 25,00$ 275,000Total Net Sales
$ 10,00-$ 110,000Variable Cost
60% $ 165,000Contributing Margin
-$ 122,000Anual Fixed Costs
16% $ 43,000Segment Margin
If the program it's implemented we get the same Contribution Marging because it doesn't affect the Variable Cost but the Segment Margin it's negativly affected reducing it 4%.
It occurs because the Contribution Margin of the improvement doesn´t cover the total cost of the investment, it generates $15,000 of Contribution Maring but the Cost of the program it's $22,000.
Ответ:
C
Explanation: