Refer to the original data Management is considering using h

Refer to the original data. Management is considering using higher-quality components that would increase the variable expense by $5 per unit. The marketing manager believes that the higher-quality product would increase sales by 20% per month. Calculate the change in total contribution margin.

Solution

I think you forgot to post \"original data\".

so I will explain procedure so that you can calculate margin.

say variable cost per unit is $x

given that variable cost (expense) is increased by $5

so new cost=$(x+5)

say original sales =$y

given that 20% increase in sales

so new sales= $y+20% of $y=$y+$0.20y=$(1.20y)

we know that margin is given by Sales minus variable cost

Hence margin=$1.20y-$(x+5)