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BUS 630 Week 1 case 2B Mendel Paper Company

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Business

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Homework

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BUS 630 Week 1 Mendel Paper Company
The Mendel Paper Company is a successful paper manufacturing
company with a sales mix of four different paper product lines
consisting of computer paper, napkins, place mats and poster board.
The plant superintendent, Marlene Herbert, is pleased with sales but
concerned with trends in the industry effecting paper manufacturing.
While napkins and paper mats are increasing because of increasing
restaurant sales, the cost of specialized printing of place mats may no
longer make these feasible to produce. Additionally, although there
are concerns of the inevitable “paperless” office, but Mendel Paper
has noticed that instead of losing paper sales they are actually
increasing their sales of computer paper.
Mendel Paper Company produces four types of paper products. These
paper products consist of computer paper, napkins, place mats, and
poster board. In the exercise given we were to compute the estimated
contribution margins for each product line with the information given
in the text. My calculations are listed in the chart below (which
answers questions 1-4).
Computer Paper
Napkins
Place Mats
Poster Board
Estimated sales volume in units

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30,000
120,000
45,000
80,000
Selling price
$14.00
$7.00
$12.00
$8.50
Variable (?)/ Material Costs
$6.00
$4.50
$3.60
$2.50
Contribution Margin
$8.00
$2.50
$8.40
$6.00
Contribution Margin Ration
(14-6)/14=0.571= 57%
(7-4.50)/7=0.357 =36%
(12-3.6)/12 = 0.7 = 70%
(8.50-2.50)/8.50 = 0.705 =71%
Total Sales Revenue

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30,000 x 14.00 = 420,000
120,000 x 7.00= 840,000
45,000 x 12 = 540,000
80,000 x 8.50 = 680,000
Total Variable Cost
420,000 x .43 = 239,400
840,000 x .64 = 537,600
540,000 x .3 = 162,000
680,000 x .29 = 197,200
In this chart the contribution margin per unit was calculated by
subtracting the variable/ material costs from the selling price. I had
some difficulty trying to decide if the material and variable cost were
the same thing. After researching and talking it over with some of my
colleagues I decided that the variable cost and material cost had to be
one entity. Please correct me if I’m wrong because this was really
difficult for me. The contribution margin rations were calculated
using the equation provided by the text. The contribution margin ratio
can be calculated by subtracting the variable price per unit from the
selling price per unit and then dividing that number by the selling
price per unit. This gave me the contribution margin ratio which is
expressed as a percent.

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