Hamed Corporation Would Like to Determine the Relative Profitability of the Company's

question 61

Multiple Choice

Hamed Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions. The company has provided the following data for product U57S: $\begin{array}{lr}\text {Selling price }&\$ 28.00 \\\text {Variable cost per unit. }&16.80 \\\text {Unit contribution margin. }&\$ 11.20 \\\hline\text {Amount of the constrained resource used by the job }&&\text { 4 minutes }\\\text {Monthly unit sales. }&&\text {3,700 units }\end{array}$ What is the profitability index for product U57S?

• A)$41,440
• B)0.40
• C)$7.00 per minute
• D)$2.80 per minute

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Definitions:

Income Before Taxes

The profit a company generates from its operations before tax obligations are deducted.

Interest

The cost of borrowing money or the return on investment, typically expressed as a percentage of the principal amount.

Turnover

The rate at which employees leave a company and are replaced by new employees or the rate at which inventory is sold and restocked.

Average Operating Assets

A measure of the investment needed to generate the operating income of a company, averaged over a period.