Case Solution

Posted by John Smith on May 11th, 2018

A little manufacturer of propane gas grills is making final changes to the 2009 operating budget and thinking about several alterations in prices, advertising, and product availability. This short case addresses the subject of contribution analysis as a good way to evaluate profit planning issues for example adding or shedding a service or product altering a cost adding or lowering expected volumes or planning an income budget. In cases like this you will find three items, each with various proportions of variable and glued costs. The merchandise using the greatest profit/unit on the full cost basis has got the cheapest contribution/unit on the variable cost basis, and the other way around. Four different marketing plans are suggested before the first is finally adopted because the arrange for the entire year. At year finish, the particular results could be in comparison towards the budget and also to a flex or modified budget in line with the actual product volumes recognized. The amounts are pretty straight forward and also the students can readily see the advantage of variable costing.