Management of a company is evaluating two potential orders. Due to limited capac

Question

Management of a company is evaluating two potential orders. Due to limited capacity only one of these orders can be accepted. Incremental fixed costs are the same for either option. Based on the information in the table below which of the following statements is true? Option A Option B Number of Units: 30 40 Contribution Margin Ratio: 35% 45% Selling Price Per unit: $400 $300 A.Option B has the highest total contribution margin. B.Option B has the lowest contribution margin ratio. C.Option A has the highest total contribution margin. D.Option A has the highest amount per dollar of sales to contribute to contribution margin and profit. E.Option B has the highest contribution margin per unit.

Explanation / Answer

E.Option B has the highest contribution margin per unit.

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