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Contribution margin

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Use the formula stated: Contribution Margin = Revenue - Variable Costs
(CM = R - VC)

Your top two Agents ... Let's call them ... Agent J and Agent K, both
bring in two "must do deals" with new extraterrestrial ah ... accounts.

Agent J's is for $ 100,000 ... 50 units at sales price $2,000 per unit
Agent K's is for $ 50,000 ... 20 units at sales price $2,500 per unit

At first pass ... Agent J's looks to be the better proposal!

After all $100,000 is MORE than $ 50,000 right? And MORE is always better?

Variable cost is $1,900 per unit.
Yet when you run the numbers, using a Contribution Margin Statement, Agent
K's proposal is now the better deal ...

How can that be? What could be done to Agent J's proposal to make it better?

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Solution Summary

Contribution margin is determined.

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Use the formula stated: Contribution Margin = Revenue - Variable Costs
(CM = R - VC)

Your top two Agents ... Let's call them ... Agent J and Agent K, both
bring in two "must do deals" with new extraterrestrial ah ... accounts.

Agent J's is for $ 100,000 ... 50 units at sales price $2,000 per unit
Agent K's is for $ 50,000 ... 20 units at sales price $2,500 ...

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  • BSc , Wuhan Univ. China
  • MA, Shandong Univ.
Recent Feedback
  • "Your solution, looks excellent. I recognize things from previous chapters. I have seen the standard deviation formula you used to get 5.154. I do understand the Central Limit Theorem needs the sample size (n) to be greater than 30, we have 100. I do understand the sample mean(s) of the population will follow a normal distribution, and that CLT states the sample mean of population is the population (mean), we have 143.74. But when and WHY do we use the standard deviation formula where you got 5.154. WHEN & Why use standard deviation of the sample mean. I don't understand, why don't we simply use the "100" I understand that standard deviation is the square root of variance. I do understand that the variance is the square of the differences of each sample data value minus the mean. But somehow, why not use 100, why use standard deviation of sample mean? Please help explain."
  • "excellent work"
  • "Thank you so much for all of your help!!! I will be posting another assignment. Please let me know (once posted), if the credits I'm offering is enough or you ! Thanks again!"
  • "Thank you"
  • "Thank you very much for your valuable time and assistance!"
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