Ricardo Products,Inc

question 53

Multiple Choice

Ricardo Products,Inc.,has a Motor Division that manufactures and sells a number of products,including a standard motor.Data concerning that motor appear below:
The Automotive Division of Ricardo Products,Inc needs 10,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $35 per unit.Because these special motors would requires more manufacturing resources than the standard motor,the Motor Division would have to reduce its production and sales of standard motors to outside customers from 87,000 units per year to 69,000 units per year.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?

• A) $486,000
• B) $874,800
• C) $1,026,000
• D) $270,000

---

Definitions:

Problem-Solving Technique

A method or process used to identify solutions to specific challenges or obstacles in a systematic manner.

Mental Set

Mental set is a cognitive framework or mindset that represents a particular way of thinking about something, often making it difficult to solve problems or see situations from a different perspective.

Functional Fixedness

a cognitive bias that limits a person to using an object only in the way it is traditionally used, hindering problem-solving and creativity.

Restructuring

A cognitive behavioral therapy technique involving the identification and modification of negative or irrational thoughts.