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Castillo Pens Produces Two Models of Titanium Pens-Grande and Petite

Question 163

Multiple Choice

Castillo Pens produces two models of titanium pens-Grande and Petite. Operations information appears below for the current year:  Grande  Petite  Units 2,5004,500 Sales revenue $160,000$96,000 Variable cost 64,00042,000 Fixed costs 40,00016,000 Profit $56,000$38,000 Profit per pen $22.40$8.44 Contribution margin per pen $38.40$12.00 Ounces of titanium per pen 8.502.50\begin{array}{lrr}&\text { Grande }&\text { Petite }\\\text { Units }&2,500&4,500\\\text { Sales revenue } & \$ 160,000 & \$ 96,000 \\\text { Variable cost } & 64,000 & 42,000 \\\text { Fixed costs } & 40,000 & 16,000 \\\text { Profit } & \$ 56,000 & \$ 38,000 \\\text { Profit per pen } & \$ 22.40 & \$ 8.44 \\\text { Contribution margin per pen } & \$ 38.40 & \$ 12.00 \\\text { Ounces of titanium per pen } & 8.50 & 2.50\end{array} Due to a supplier problem, only 1,400 pounds (22,400 ounces) of titanium will be available during each of the next few months. Each ounce of titanium costs $0.80. Castillo needs to produce at least 900 of each model to stay competitive and can sell all it produces. Given the limited resource, how many Petite's should Castillo produce to maximize profits?


A) 5,900 units
B) 900 units
C) 8,960 units
D) 5,625 units

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