1) Explain how contribution margin analysis useful for managerial decision and performance evaluation?
Reporting contribution margin by segment is useful in assessing the profitability of each segment. It allows managers to analyze operations and make recommendations as to how to direct their efforts.
2) Samsung managers rely on reports of variable costs. How can variable costing reports prepared using the contribution margin format help managers in computing break-even volume in units?
The contribution margin format income statement has the cost-volume-profit data readily available. The necessary components for CVP analysis - revenues, variable expenses, contribution margin, and fixed expenses - are shown on the contribution margin format income statement.
3) How can samsung use variable costing to help better understand its operations and to make better pricing decisions?
Samsung selling prices must cover the cost of the items sold, as well as all selling and administrative expenses. Obviously, a selling price must exceed the cost of manufacturing the item. But Palm might have other variable costs related to the item, such as sales commissions. Palm can use variable costing to create a contribution margin format income statement to help managers understand how many items must be sold to break even, and how they need to price their items. Of course, with multiple products, Palm's contribution margin ratio is an average over
all of the products they sell.