fill in the blank question\nsweet dreams sells pillows for $25 each. variable costs are $15 per pillow. the…

fill in the blank question\nsweet dreams sells pillows for $25 each. variable costs are $15 per pillow. the company is considering improving the quality of materials which will increase variable costs to $19. the company expects the improved materials will increase sales from 1,200 to 1,500 pillows per month. the impact of this change on total contribution margin would be a(n) (increase/decrease) of $ (enter either increase or decrease and the dollar amount as a whole number.)\nneed help? review these concept resources.\nread about the concept

fill in the blank question\nsweet dreams sells pillows for $25 each. variable costs are $15 per pillow. the company is considering improving the quality of materials which will increase variable costs to $19. the company expects the improved materials will increase sales from 1,200 to 1,500 pillows per month. the impact of this change on total contribution margin would be a(n) (increase/decrease) of $ (enter either increase or decrease and the dollar amount as a whole number.)\nneed help? review these concept resources.\nread about the concept

Answer

Explanation:

Step1: Calculate initial contribution margin

Contribution margin per unit = Selling - Variable cost. Initial contribution margin per unit = $25 - 15=$10$. Initial total contribution margin = $10\times1200 = $12000$.

Step2: Calculate new contribution margin

New variable cost per unit is $19$. New contribution margin per unit = $25 - 19=$6$. New total contribution margin = $6\times1500=$9000$.

Step3: Calculate change in contribution margin

Change = New - Initial. $9000 - 12000=-$3000$.

Answer:

decrease, 3000