Which of the Following Products Should Be Produced to Maximize

question 27

Multiple Choice

Which of the following products should be produced to maximize profit?

• A)Product A: Sales volume of 10,000 units, unit contribution margin of $20, fixed costs of $120,000.
• B)Product B: Sales volume of 9,000, unit contribution margin of $22, fixed costs of $150,000.
• C)Product C: Sales volume of 8,000, unit contribution margin of $21, fixed costs of $110,000.
• D)Product D: Sales volume of 11,000, unit contribution margin of $23, fixed costs of $170,000.

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Definitions:

Markup

The disparity between a product or service's cost and its retail price, represented as a percentage increase from the cost.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated before the period begins based on the relationship between estimated overhead costs and an allocation base.

Variable Manufacturing Overhead

Costs that vary with production volume, such as utilities and indirect materials.

Machine-Hours

A measure of the time that a machine is operated, used as a way to allocate machine-related costs to products.