Yetmar Corporation produces two products, Pots and Pans.The following information is available for these two products: $\begin{array}{lrr}&\text { Pots }&\text { Pans }\
\text { Selling price per unit } & \$ 25.00 & \$ 15.00 \
\text { Variable cost per unit } & 12.00 & 9.00 \
& & \
\text { Total fixed costs } & \$ 15,000 & \
\text { Total production capacity } &{10,000} & \text { units }
\end{array}$ If a maximum of 7,000 units of each product can be sold, it would be best to _____.
A)produce 7,000 units of Pots and 3,000 units of Pans to maximize profits
B)produce only 3,000 units of Pots and 7,000 units of Pans to maximize profits
C)produce 5,000 units of both Pots and Pans
D)discontinue the production of both Pots and Pans

Question

Quizplus · Accepted Answer

To maximize profits, calculate the contribution margin per unit for both products: Pots ($25 - $12 = $13) and Pans ($15 - $9 = $6). Given the total production capacity and sales limits, producing 7,000 units of Pots (with a higher contribution margin) and filling the remaining capacity with Pans maximizes profits.

Yetmar Corporation Produces Two Products, Pots and Pans If a Maximum of 7,000 Units of Each Product Can