Coronado Industries can sell all the units it can produce of either Plain or Fan

ID: 2562297 • Letter: C

Question

Coronado Industries can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $54 and takes two machine hours to make and Fancy has a unit contribution margin of $57 and takes three machine hours to make. There are 2400 machine hours available to manufacture a product. What should Coronado do? The same total profits exist regardless of which product is made. O Make Plain because more units can be made and sold than Fancy. O Make Plain which creates $8 more profit per machine hour than Fancy does. O Make Fancy which creates $24 more profit per unit than Plain does Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

S.No

Particulars

Plain

Fancy

(a)

Unit Contribution Margin

(b)

Machine Hours

(c)

Contribution Margin Per Machine Hour [(a)/(b)]

(d)

Plain creates more profit that fancy per Machine Hour [27 - 19]

Therefore, the right answer is Option (c) Make Plain which creates $ 8 more profit per machine hour than Fancy Does