Answer the Following Questions Using the Information Below

question 97

Multiple Choice

Answer the following questions using the information below:
Gourmet Baking Shop has two departments,mixing and baking.The mixing department is limited by the speed of operating the mixing machine.Baking is limited by the speed of the workers.Baking normally waits for work from mixing.Each department works an eight-hour day.If mixing begins work two hours earlier than baking each day,the two departments generally finish their work at about the same time.Not only does this eliminate the bottleneck,but also it increases finished units produced each day by 240 units.All units produced can be sold even though the change increases inventory stock by 20% from 400 units.The cost of operating the mixing department two more hours each day is $1600.The contribution margin of the finished products is $8 each.Inventory carrying costs are $0.40 per unit per day.
-What is the change in the daily contribution margin if the change is made?

• A)$(634)
• B)$(608)
• C)$272
• D)$800

---

Definitions:

Unlimited Resources

Access to an infinite amount of materials or assets without any constraints.

Human Wants

The desires and needs of individuals for goods, services, and other intangibles that lead to satisfaction.

Opportunity Cost

The toll taken for not picking the second highest preference when decisions are formulated.

Tax Cut

A reduction in the amount of taxes imposed by the government, which can affect individuals, corporations, or specific sectors.