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Hello everybody,
Can someone explain to me why a part of the answer of this question.
How the contribution has been inflated? I cannot get the answer figures.
And also, why we do not use the data given under point 2 in the question for 12$ price per unit. I calculated the contribution for Year 1 as 250,000x12x1.05=3,150 and in the answer it says: 1,330 for Year 1.
For Year 2 it says: 2, 264 (I totally do not understand how this figure was reached).
I would very much appreciate your help on the above matter.Regards, Nevy
Sales – Variable cost = Contribution.
Here, in year 1, Sales is 250,000 units and the selling price that is $12 is inflated by 5% per year.
250,000*12*1.05= 3150,000
Vriable cost that is 250,000*7*1.04 = 1820,000Now Subtract Variable cost from Sales figure 3150,000 – 1820,000 = 1330,000
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