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Use the Following Information to Answer the Question(s) Below -What Is the Gross Margin Per Minute of Plugs Manufactured

question 38

Multiple Choice

Use the following information to answer the question(s) below.
Cerebro Manufacturing produces four types of structural support fittings-plugs, rails, rivets, and clips-which are machined on two CNC machining centers. The machining centers have a capacity of 250,000 minutes per year. The gross margin per unit and machining requirements are shown in the spreadsheet below. $\begin{array}{|l|l|l|l|l|l|l|}\hline&{\text { A }} & \text { B } & \text { C } & \text { D } & \text { E } & \text { F } \\\hline& \text { Cerebro } && & & & \\1&\text { ManufacturingModel } & & & & & \\\hline 2\\\hline 3 & \text { Product } & \text { Plugs } & \text { Rails } & \text { Rivets } & \text { Clips }& \begin{array}{l}\text { Machine } \\\text { Capacity } \\\text { (mins./year) }\end{array} \\\hline 4 & \text { Gross margin/unit } & \$ 0.40 & \$ 1.20 & \$ 0.80 & \$ 1.10 & \\\hline 5 & \text { Minutes/unit } & 1 & 2 & 3 & 1.5 & 250,000 \\\hline 6 & \text { Gross margin/minute } & \\\hline 7 & \text { Maximum production } & \\\hline 8 & \text { Profit } & \\\hline\end{array}$
-What is the gross margin per minute of plugs manufactured?

Definitions:

Economic Profits

The excess of total revenue over total costs, including both explicit and implicit costs, signifying a return beyond the normal profit level.

Natural Monopoly

A market situation where due to high fixed or startup costs, a single firm can supply a product or service at a lower cost than any potential competitor, leading to a dominance of the market.

Long-Run Average Costs

Reflects the per-unit cost of production when all inputs are considered variable over time, highlighting economies of scale.

Perfectly Price-Discriminated

A pricing strategy where a seller charges the maximum possible price that each consumer is willing to pay, leading to maximum profit without surplus.