CORRECT ANSWER A. IF THE CHANGE IS IMPLEMENTED, LAZAR’S TOTAL C...

215.

Correct answer a. If the change is implemented, Lazar’s total contribution margin would

increase by $125,000 as shown below.

Decrease in direct material: .5 x $5

= $2.50

Increase in variable overhead: ($3 ÷ 2 hrs.) x 3.5 hrs. - $3

= $2.25

Reduction in cost: $2.50 - $2.25

= $.25

Increase in contribution: $.25 x 500,000 units

= $125,000