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