The Following Information Is Provided for Two Products Assume the Products Will Be Sold in a Store Where

question 41

Multiple Choice

The following information is provided for two products: $$\begin{array} { l c c } & \text { Product X } & \text { Product } Y \\\text { Selling price per unit } & \$ 3 5& \$ 2 5 \\\text { Variable cost per unit } &2 0& 15\end{array}$$ Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products.Expected sales for Product X are 6,000 units,and expected sales for Product Y are 8,000 units.Which product should be sold and why?

• A) Product Y should be sold solely because the expected demand for this product is greater than the expected demand for Product X.
• B) Product Y should be sold because sales of this product will provide a greater profit.
• C) Product X should be sold because it provides a greater contribution margin per unit.
• D) Product X should be sold because sales of this product will provide a greater profit.

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Definitions:

Gross Profit

The difference between revenue and the cost of goods sold before accounting for certain other costs.

Periodic Method

An inventory accounting method where the inventory balance is updated at the end of each period after a physical count.

Purchases Discounts

Reductions in price given by suppliers for prompt payment or purchases in bulk.

Merchandise Inventory

A detailed list of all the goods a business holds for the purpose of resale, capturing their quantity and possibly value.