Question 55

Increasing quality of material allows a company to increase its contribution receipts per unit.

Enhancing the quality of materials used in production can lead to a more desirable product, which often justifies a higher selling price. This strategy can effectively increase the contribution margin per unit, as customers may be willing to pay more for superior quality.

A) Decreasing accounting salaries

While reducing accounting salaries may lower overall operational costs, it does not directly impact the contribution receipts per unit of the product sold. This option does not enhance the value of the product or its appeal to customers.

B) Using cheaper materials

Using cheaper materials might lower production costs, but it often compromises product quality. This can lead to decreased customer satisfaction and potentially lower sales prices, thus negatively affecting contribution receipts per unit.

C) Increasing quality of material

By increasing the quality of materials, the company can produce a superior product that attracts more customers and allows for higher pricing. This improvement directly contributes to a higher contribution margin per unit, making it a valid strategy for increasing profitability.

D) Increasing salary of plant manager

Raising the salary of a plant manager does not inherently increase the contribution receipts per unit. While it may improve management morale or performance, it does not directly influence the product's marketability or pricing strategy.

Conclusion

Increasing the quality of materials is a strategic approach that can significantly enhance a product's marketability and allow the company to charge higher prices, thereby increasing contribution receipts per unit. In contrast, the other options either do not directly affect the contribution margin or could potentially harm the product’s appeal and profitability.