Descriptive Title

Mendel Paper Company

INTRODUCTION

Mendel Paper Company produces base paper product offerings at one of its plants: PC paper, napkins, place mats, and posters. Despite the fact that the superintendent, Marlene Herbert, is fulfilled by expanded deals, she is likewise worried about the probable costs and expenses. The director is worried with the high altered expense of creation, the expansions in settled overhead and even variable overhead. He feels that the production of the mats should be stopped. His purpose behind the stopping is that the extraordinary printing is driving up the variable overhead to the point where the organization may not think that its gainful to proceed with the line. In the wake of looking into the future forecasts of the organization I will answer the director worries by utilizing both new and past analytics to bolster my advice bases on research and experience. .

ESTIMATED CONTRIBUTION MARGINS BY PRODUCT LINE

Volume 30,000 120,000 45,000 80,000 275000

Selling price $14.00 $7.00 $12.00 $8.50

Units per hour 6 10 5 4

Material Cost 6.00 4.50 3.60 2.50

Variable overheads $9.00 $6.00 $12.00 $8.00

Variable overhead per unit 9/6 = 1.5 6/10 = .6 12/5 = 2.4 8/4 = 2

Total sales 30000 X 14 = 420000 120000 X 7 = 840000 45000 X 12 = 540000 80000 X 8.50 = 680000 420000 + 840000 + 540000 + 680000 = 2480000

Material cost 30000 X 6 = 180000 120000 X 4.50 = 540000 45000 X 3.60 = 162000 80000 X 2.50 = 200000

Variable overheads 30000 X 1.5 = 45000 120000 X .6 = 72000 45000 X 2.4 = 108000 80000 X 2 = 160000

Contribution Margin 420000 - 180000 - 45000 = 195,000 840000 - 540000 - 72000 = 228000 540000 - 162000 - 108000 = 270000 680000 - 200000 - 160000 = 320000 195000 + 228000 + 270000 + 320000 = 1013000

CM per unit 195000/30000 = 6.50 228000/120000 = 1.90 270000/45000 = 6.00 320000/80000 = 4.00

In the table, contribution margins per unit were computed by subtracting the gross sales, material expense, and variable...