Brooks Corporation Can Sell All the Units It Can Produce

question 6

Multiple Choice

Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $72 and takes two machine hours to make and Fancy has a unit contribution margin of $90 and takes three machine hours to make. There are 2,400 machine hours available to manufacture a product. What should Brooks do?

• A) Make Fancy which creates $18 more profit per unit than Plain does.
• B) Make Plain which creates $6 more profit per machine hour than Fancy does.
• C) Make Plain because more units can be made and sold than Fancy.
• D) The same total profits exist regardless of which product is made.

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Definitions:

Arithmetic Average Return

The simple average of a series of returns generated over a period of time.

Variance

A statistical measurement of the dispersion of returns for a given security or market index, indicating volatility.

Time Horizon

The length of time over which an investment is expected to be held or a financial goal is to be achieved.

Standard Deviation

A measure of the dispersion or variability in a dataset, commonly used in finance to assess the volatility of an asset's returns over time.