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Pillsbury Corporation Makes Two Types of Ice Cream: Chocolate and Peanut

Question 46

Multiple Choice

Pillsbury Corporation makes two types of ice cream: Chocolate and Peanut Butter. Operating information from the previous year follows:  Chocolate  Peanut Butter  Units produced and sold 6,0005,000 Machine hours used 6,0002,500 Sales price per unit $8$11 Variable cost per unit $5$9\begin{array} { l r r } & \text { Chocolate } & \text { Peanut Butter } \\\text { Units produced and sold } & 6,000 & 5,000 \\\text { Machine hours used } & 6,000 & 2,500 \\\text { Sales price per unit } & \$ 8 & \$ 11 \\\text { Variable cost per unit } & \$ 5 & \$ 9\end{array} Fixed costs of $30,000 per year are presently allocated equally between both products. If the product mix were to change, total fixed costs would remain the same. Assuming there is unlimited demand for both products and Pillsbury has 20,000 machine hours available, how many units of each product should be produced and sold respectively?


A) 0, 0.
B) 0, 40,000.
C) 6,000, 20,000.
D) 6,000, 40,000.
E) 20,000, 0.

Correct Answer:

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