Despite a sizable increase in the number of cookies

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Despite a sizable increase in the number of cookies sold, the product’s expected contribution to the overall profitability of the firm decreased. Madison has asked Blair to identify the reason why the contribution margin decreased. Blair has gathered the following information to help in her analysis of the decrease. Usage Report for April Cost Item Quantity Actual Cost DM: Cookie mix 4,650,000 oz \$93,000 Milk chocolate 2,660,000 oz 532,000 Almonds 480,000 oz 240,000 DL: Mixing 450,000 min 108,000 Baking 800,000 min 240,000 Variable Overhead 750,000 Total OH cost \$1,963,000 1. Prepared a new contribution report for April, in which: The static budget column in the contribution report is replaced with a flexible budget column. The variance in the contribution report are recomputed as difference between the flexible budget and actual columns. Report for April based on a Flexible Budget Items Flexible Budget Actual Variance Units (in pounds) 450,000 (400,000x1.125) 450,000 - Revenue \$3,600,000 (\$3,200,000x1.1 25) \$3,555,000 \$45,000 U DM 652,500 (\$580,000x1.12 5) \$865,000 212,500 U DL 378,000 (336,000x1.125) 348,000 30,000 F V OH 729,000 (648,000x1.125) 750,000 21,000 U Total variable costs \$1,759,500 (\$1,564,000x1.1 25) \$1,963,000 \$203,500 U CM \$1,840,500 (\$1,636,000x1.1 25) \$1,592,000 \$248,500 U
Each dollar number in the flexible budget column is equal to the static budget multiplied by 1.125 (450,000/400,000). This reflects the increase in the volume of sales from 400,000 units to 450,000 units.
2. What is the total contribution margin in the flexible budget column of the new report prepared for requirement 1?
3. Explain (i.e.; interpret) the meaning of the total contribution margin in