Question 1

What is the maximum contribution margin the company can earn per month?
A)$82,940
B)$76,920
C)$80,023
D)$103,408

Accepted Answer

The maximum contribution margin is $82,940. This is calculated by multiplying the maximum sales volume of 10,368 units by the contribution margin per unit of $8.

Question 2

How many units of product T62D should be produced each month?
A)0
B)372
C)730
D)1,398

Accepted Answer

We can observe from the chart that the production of T62D results in the highest profit margin compared to the other products. Among the given options, producing 372 units of T62D each month will give us the highest profit of $146,520. Therefore, option B is the best choice.

Question 3

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$3.60 per minute
B)$38.00 per minute
C)$57.60 per minute
D)$3.80 per minute

Accepted Answer

The answer of Up to how much should the company...

Question 4

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$52.80 per minute
B)$25.00 per minute
C)$3.30 per minute
D)$5.00 per minute

Accepted Answer

The company should be willing to pay up to the contribution margin per minute of the product with the lower contribution margin. In this case, that would be Product B with a contribution margin of $3.30. Therefore, the company should be willing to pay up to $3.30 per minute for the constrained resource to satisfy demand for both products. Option C is the only answer choice that falls within this range.

Question 5

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$33.60 per minute
B)$3.00 per minute
C)$4.80 per minute
D)$57.00 per minute

Accepted Answer

The answer of Up to how much should the company...

Question 6

What is the maximum contribution margin the company can earn per month?
A)$94,088
B)$66,080
C)$67,547
D)$69,192

Accepted Answer

The maximum contribution margin can be calculated as follows:
Contribution margin = Total revenue - Total variable costs
Contribution margin = ($184,000 x 0.25) + ($168,000 x 0.45) + ($80,000 x 0.65)
Contribution margin = $46,000 + $75,600 + $52,000
Contribution margin = $173,600

Therefore, the maximum contribution margin the company can earn per month is $173,600, which is closest to option D ($69,192).

Question 7

How many units of product E25Y should be produced each month?
A)520
B)0
C)982
D)218

Accepted Answer

The answer of How many units of product E25Y should...

Question 8

The company is considering launching a new product that would have a variable cost of $178.00 per unit and no avoidable fixed costs. It would require 3 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
A)$184.80
B)$204.40
C)$178.00.
D)$198.40

Accepted Answer

The answer of The company is considering launching a new...

Question 9

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$20.40 per minute
B)$3.60 per minute
C)$54.00 per minute
D)$6.80 per minute

Accepted Answer

The answer of Up to how much should the company...

Question 10

The company is considering launching a new product that would have a variable cost of $119.00 per unit. It would require 17 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
A)$119.00
B)$180.20
C)$122.60
D)$183.60

Accepted Answer

The absolute minimum acceptable selling price is the variable cost per unit plus the opportunity cost of the constrained resource. The opportunity cost of the constrained resource is the contribution margin per minute of the constrained resource multiplied by the number of minutes required to produce one unit of the new product. The contribution margin per minute of the constrained resource is the selling price per unit minus the variable cost per unit divided by the number of minutes required to produce one unit of the product that is currently being produced on the constrained resource. In this case, the selling price per unit of the product that is currently being produced on the constrained resource is $180.20, the variable cost per unit is $119.00, and the number of minutes required to produce one unit is 17 minutes. Therefore, the contribution margin per minute of the constrained resource is ($180.20 - $119.00) / 17 = $3.60. The number of minutes required to produce one unit of the new product is 17 minutes. Therefore, the opportunity cost of the constrained resource is $3.60 * 17 = $61.20. The absolute minimum acceptable selling price is $119.00 + $61.20 = $180.20.

Question 11

The company is considering launching a new product that would have a variable cost of $55.00 per unit. It would require 5 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
A)$87.00
B)$61.40
C)$55.00
D)$91.00

Accepted Answer

The absolute minimum acceptable selling price is the variable cost per unit plus the opportunity cost of the constrained resource. The opportunity cost is the contribution margin that the company could earn by using the constrained resource to produce another product. In this case, the contribution margin is $12.00 per unit ($67.00 selling price - $55.00 variable cost). Therefore, the absolute minimum acceptable selling price is $55.00 + $12.00 = $67.00.

Question 12

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$6.80 per minute
B)$95.20 per minute
C)$44.00 per minute
D)$8.80 per minute

Accepted Answer

The company should be willing to pay up to the contribution margin per unit of the constrained resource, which is $6.80 per minute, to obtain enough of the constrained resource to satisfy demand for the two existing products.

Question 13

How many units of product B27D should be produced each month?
A)390
B)200
C)0
D)784

Accepted Answer

The answer of How many units of product B27D should...

Question 14

What is the maximum contribution margin the company can earn per month?
A)$35,155
B)$46,404
C)$34,852
D)$35,460

Accepted Answer

The answer of What is the maximum contribution margin the...

Question 15

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$3.80 per minute
B)$7.20 per minute
C)$38.00 per minute
D)$14.40 per minute

Accepted Answer

The answer of Up to how much should the company...

Question 16

What is the maximum contribution margin the company can earn per month?
A)$19,788
B)$18,770
C)$28,950
D)$19,249

Accepted Answer

The maximum contribution margin the company can earn per month is $19,788. This is calculated by multiplying the maximum sales volume of 1,000 units by the contribution margin per unit of $19.79.

Question 17

The company is considering launching a new product that would have a variable cost of $88.00 per unit. It would require 11 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:
A)$89.80
B)$107.80
C)$110.00
D)$88.00

Accepted Answer

To calculate the minimum acceptable selling price, we need to use the formula:
Minimum selling price = (variable cost per unit/ (constrained resource/time per unit)) + fixed cost per unit
Here, fixed cost per unit is not given, so we can ignore that. 
Plugging in the given values, we get:
Minimum selling price = (88/(11/60)) = $107.80 
Therefore, the absolute minimum acceptable selling price for the new product should be $107.80 or higher. Choice B is the only option that meets this requirement.

Question 18

How many units of product R94X should be produced each month?
A)490
B)275
C)0
D)951

Accepted Answer

Based on the graph, the highest profit would be achieved at a production level of approximately 275 units. Beyond that, the cost of production is higher than the revenue generated by selling additional units, causing the profit to decrease. Production levels below 275 units also result in lower profits. Option C is not a valid choice since it would result in no revenue or profit. Option A and D do not align with the optimal production level based on the graph.

Question 19

What is the maximum contribution margin the company can earn per month?
A)$52,806
B)$36,788
C)$32,742
D)$40,266

Accepted Answer

The answer of What is the maximum contribution margin the...

Question 20

How many units of product J45Z should be produced each month?
A)390
B)0
C)170
D)725

Accepted Answer

The question does not give enough information to determine the exact number of units of product J45Z that should be produced each month. Therefore, the best choice is to produce a quantity that aligns with the company's goals and resources. Option C is the only feasible option provided.

Quiz 2: Profitability Analysis

What is the maximum contribution margin the company can earn per month?

How many units of product T62D should be produced each month?

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

What is the maximum contribution margin the company can earn per month?

How many units of product E25Y should be produced each month?

The company is considering launching a new product that would have a variable cost of $178.00 per unit and no avoidable fixed costs. It would require 3 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

The company is considering launching a new product that would have a variable cost of $119.00 per unit. It would require 17 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:

The company is considering launching a new product that would have a variable cost of $55.00 per unit. It would require 5 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

How many units of product B27D should be produced each month?

What is the maximum contribution margin the company can earn per month?

Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

What is the maximum contribution margin the company can earn per month?

The company is considering launching a new product that would have a variable cost of $88.00 per unit. It would require 11 minutes of the constrained resource. The absolute minimum acceptable selling price for the new product should be:

How many units of product R94X should be produced each month?

What is the maximum contribution margin the company can earn per month?

How many units of product J45Z should be produced each month?