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Problem - Contribution Margin Reporting and Analysis

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Problem - Contribution Margin Reporting and Analysis-Service Company

The management of Mid-Atlantic Railroad Company introduced in Exercise 20-20 improved the profitability of the Boston/Philadelphia route in June by reducing the price of a railcar from $614 to $556. This price reduction increased the demand for rail services. Thus, the number of railcars increased by 236 railcars to a total of 768 railcars. This was accomplished by increasing the size of each train but not the number of trains. Thus, the number of train-miles was unchanged. All the activity rates remained unchanged.

Required -

a. Prepare a contribution margin report for the Boston/Philadelphia route for June. Calculate the contribution margin ratio in percentage terms to one decimal place.

b. Prepare a contribution margin analysis to evaluate management's actions in June. Assume that the June planned quantity, price, and unit cost was the same as May.

Reference no: EM132685945

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