Anne Sugar makes large ceramic pots for use in outdoor Landscaping. She currentl

Question

Anne Sugar makes large ceramic pots for use in outdoor Landscaping. She currently has two models, one square and the other round.

0 Mail CH7 Qui X C ? Blowi C Probl C SolvedM Math | C ezto.mheducation.com/hm.tpx ost Visited my.utrgv.edu ALGEBRA Search everything on... 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: SquareRound Sales price Variable cost Firing time $82 $32 2.5 hours $93 $30 3.5 hours 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. Compute the contribution margin per unit and contribution margin per hour of firing time. Square Round Ceramic Pot Ceramic Pot Contribution Margin per Unit Contribution Margin per Hour Which type of pot should Anine produce to maximize her short-term profit? o square Ceramic Pot round Ceramic Pot Both

Explanation / Answer

Contribution margin per unit = Sales price per unit - Variable cost per unit

Squared ceramic pot:

Contribution margin per unit = $82 - $32

= $50

Contribution margin per hour = $50 / 2.5 hours

= $20.

Round ceramic pot:

Contribution margin per unit = $93 - $30

= $63

Contribution margin per hour = $63 / 3.5 hours

= $18.

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