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Contribution

1. What is contribution?

2. What is total contribution?

3. What are its uses?

4. Scenario: South Hams Brewery produces its beer at a ariablecost o! "1.#$ a pint and sells it !or "2.$$ per pint.

a% What is the contribution per unit? Show wor&in's(

#. Scenario: South Hams Brewery sells )$*$$$ pints each monthat the aboe price.

a% What is the total contribution? Show wor&in's(

b% +sin' the details aboe* i! !i,ed costs are "2#*$$$* what is thepro!it 'enerated by these sales? Show wor&in's(

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Contribution: Special -rder ecisions

/. What is a special order?

). Scenario: 0 !irm sells product 0 !or "33. C are "2$ and C are"/*$$$. he !irm has receied a special order !or its product o! 1$$ units at "2# per item. Should the !irm accept the order? Why?

. Scenario: 0nother !irm sells a product 5 product B !or "#). Care "44 and C are "6*/$$. he !irm has receied a special order !or $ items at "4$ per unit. Should the !irm accept the o!!er?Why?

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6. +nits o! output: 12*$$$ per annum  7roduction capacity: 1/*$$$ per annum  +sual sellin' price: "12# per unit  C: "#$*$$$

  C: "1$$ per unit

he !irm is approached by a potential customer that wishes to buy2$$$ units. he price o!!ered is 1$8 lower than usual sellin' price.urthermore* modi!ications need to be made to raw materials usedand production methods employed. hese chan'es will add 1$8to C and increase C by ")$$$. Should the o!!er be accepted?Why?

1$. +sin' the same initial scenario as aboe* the !irm isapproached by another potential customer with another order. he!inancial data relatin' to the order is as !ollows:

9 order o! 4$$$ units9 price o!!ered is #8 lower than usual9 C increased by 38

9 C rise by "3*$$$.$$

Should the order be accepted?

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11. iy ;td

iy ;td sell three products in the +< =ar&et. >t has beenapproached by three di!!erent !irms with special order o!!ers:

irm is based in @ermany and has had no preious contact withiy ;td. >t has o!!ered iy a !i,ed price o! "3 !or 2$$ units o! product 0.

irm A re'ularly buys product B on a small scale. >t wishes to buy4#$ items at a !i,ed price o! "22.

irm is a company that has re'ularly purchased items !rom iy

;tds main competitor. he competitor has e,perienced di!!icultiesin supplyin' irm which is desperate to !ind alternatie supplies.7roduct C is the closest substitute to the competitors product.irm has o!!ered "23 per unit in return !or a set order o! 3$$items on a Dta&e it or leae it basis.

Sellin'7riceE" per unit%

ariableCostsE" per unit%

i,edCostsE" per unit%

Current-utputEunits%

=a,CapacityEunits%

7roduct 0 #$ 22 *4$$ /#$ 6$$

7roduct B 3$ 16 #*#$$ 4#$ 6$$

7roduct C 2$ 1$ #*$$$ )$$ 6$$

Based on Fuantitatie and Fualitatie !actors* adise iy ;td onwhether it should accept the order !rom irms * A and . Gusti!yyour recommendations in each case.