Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currentl
ID: 2487578 • Letter: A
Question
Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne’s creations, only one pot can be fired in the kiln at a time. Information about each model follows:
Assume that Anne can sell as many pots as she can create but that she is limited as to the number of hours that the kiln can be run.
Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne’s creations, only one pot can be fired in the kiln at a time. Information about each model follows:
Explanation / Answer
Contribution Margis per hour is calculated by dividing the CM per unit by the firing time per unit for square & round which is 2.5 & 3.5 hours respectively.
Square Round Sale Price $ ( A) 70 90 Variable cost $ (B) 15 20 Contribution Margin per unit $ (A-B) 55 70 Contribution Margin per hour $ 22 20Related Questions
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