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A Case 6-4 Mendel Paper Company

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Mendel Paper Company

Units Per hour 6 10 5 4
Variable Overhead 9.00 6.00 12.00 8.00 per hour

Computer paper Napkins Place Mats Poster Board Total
Volume 30,000 120,000 45,000 80,000
Selling Price 14 7 12 8.5
Cost of material 6 4.5 3.6 2.5
Units per hour 6 10 5 4
Variable Overheads 9 6 12 8
Variable Overheads per unit 1.5 .6 2.4 2
Total Sales 420,000 840,000 540,000 680,000 2,550,000
Material costs 180,000 540,000 162,000 200,00
Variable Overheads 45,000 72,000 108,000 160,000
Contribution Margin 195,000 228,000 270,000 320,000 1,013,000
Contribution Margin per unit 6.50 1.90 6.00 4.00

Computer paper Napkins Place …show more content…

The variable cost of the place mats is the concern of Marlene Herbert. As you can tell by looking at the contribution margins the place mats are adding to the profits of the company. Stopping the production of the place mats would not be a good idea because it would take away from the company profits. Due to the selling price being higher than the variable cost Ms. Herbert should not be concerned with it. As Wouters (1993) put it management must use accounting data when making decisions, which will help in determining if Mendel Paper Company should continue producing place mats or not. Uncontrollable cost should be one of the things looked at before making this decision as well. It is said by Sarkar et al (2013) that when the variable cost is less than the selling price the decisions should be to continue the

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