Canary's Products Inc. manufactures three different product lines, Basic, Better, and Best. Considerable market demand exists for all models. The following per unit data apply:
a.For each model, compute the contribution margin per unit.
b.For each model, compute the contribution margin per machine-hour.
c.If there is excess capacity, which model is the most profitable to produce? Why?
d.If there is a machine breakdown, which model is the most profitable to produce? Why?
e.How can Canary encourage its sales people to promote the more profitable model?
Definitions:
Dividend Payout
The portion of a company's earnings distributed to shareholders, usually in the form of cash or stock.
Debt-Equity Ratio
A measure used to assess a company's financial leverage, calculated by dividing its total liabilities by shareholders' equity.
Compromise Policy
A policy approach that seeks a middle ground or mutual concessions among different interests or positions.
Constant Dividends
Dividend payments that are expected to remain at a fixed rate over time regardless of changes in the company's earnings or profitability.
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