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Contribution Margin & Effects of Surprising Sales Boost

Sitting Pretty, Inc. makes garden chairs that sell for $800 each. The variable cost of producing the chairs is $300 per unit and the fixed costs are $50,000 each month.

a. What is the contribution margin associated with the chairs produced and sold by Sitting Pretty?
b. In June, the company had sales that were $5,000 higher than anticipated. What is the expected effect on profits as a result of these sales?

Solution Preview

a.

Contribution margin = [Selling price - Variable cost] = $800 - $300 = ...

Solution Summary

The brief calculations to find the contribution margin and effect on profits of higher-than-expected sales for Sitting Pretty are shown.

$2.19