Rose Incorporated Manufactures Two Types of Vases, Small and Large

question 60

Essay

Rose Incorporated manufactures two types of vases, small and large. The following per unit data are available:
Small Vase Large Vase
Sale price $60 $100
Variable costs $35 $60
Machine hours required for 1 vase 1 2
Total fixed costs are $600,000 and Rose Incorporated can sell a maximum of 25,000 units of each type of vase annually. Machine hour capacity is 50,000 hours per year.
A. Determine the contribution margin per unit for each type of vase.
B. Determine the contribution margin per machine hour for each type of vase.
C. Determine the number of units of each style of vase that Rose Incorporated should produce to maximize operating income.
D. What is the dollar amount of the maximum operating income as calculated in C above?

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Definitions:

Expansionary Monetary Policy

A form of macroeconomic policy that aims to increase the money supply and typically lower interest rates to stimulate economic growth.

Discount Rate

The rate at which central banks lend to commercial banks or other financial institutions.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, bills, and notes, which are considered low-risk investments.

Required Reserve Ratio

The fraction of deposits that a bank must hold in reserve and cannot lend out, set by the central bank to control the money supply.