Canary's Products Inc.manufactures three different product lines,Basic,Better,and Best.Considerable market demand exists for all models.The following per unit data apply:
a.For each model,compute the contribution margin per unit.
b.For each model,compute the contribution margin per machine-hour.
c.If there is excess capacity,which model is the most profitable to produce? Why?
d.If there is a machine breakdown,which model is the most profitable to produce? Why?
e.How can Canary encourage its sales people to promote the more profitable model?
Definitions:
Carrying Amount
The book value of an asset as recorded in an entity's financial statements, calculated as the original cost minus accumulated depreciation or amortization.
Bonds Issued
A financial instrument representing a loan made by an investor to a borrower, typically corporate or governmental, where the issuer commits to paying back the principal along with interest at a specified future date.
Straight-Line Method
A depreciation method that allocates an equal amount of the cost of an asset to each year of its useful life.
Effective Interest Method
An accounting technique used to allocate the interest expense or income over the life of a financial instrument, reflecting the changing amount of outstanding principal over time.
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