Schumann Company Manufactures Two Products: Hats and Caps

question 6

Essay

Schumann Company manufactures two products: Hats and Caps.The following information is available:
Total fixed costs are $52,000 per year.Labor hour capacity is 15,000 hours per year.
Required:
A)Which product has the highest contribution margin per unit?
B)Which product has the highest contribution margin per unit in light of the production constraint?
C)Assume Schumann Company can only produce one product.Which product should be produced? What will net income be?

• A)Which product has the highest contribution margin per unit?
• B)Which product has the highest contribution margin per unit in light of the production constraint?
• C)Assume Schumann Company can only produce one product.Which product should be produced? What will net income be?

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Definitions:

Sampling Distribution

A probability distribution of a statistic obtained from a large number of samples drawn from a specific population.

Mean

The average of a set of numbers, calculated by dividing the sum of all the values by the number of values.

Central Limit Theorem

Theorem stating that sample means are approximately normally distributed for an infinite number of random samples drawn from a population.

Population Mean

The average value of a population's characteristics.