Wengert Products,Inc.,has a Motor Division that manufactures and sells a number of products,including a standard motor.Data concerning that motor appear below:
The Automotive Division of Wengert Products,Inc needs 8,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $20 per unit.Because these special motors would requires more manufacturing resources than the standard motor,the Motor Division would have to reduce its production and sales of standard motors to outside customers from 40,000 units per year to 27,200 units per year.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?
A) $336,000
B) $537,600
C) $860,160
D) $755,200

Question

Wengert Products,Inc.,has a Motor Division that manufactures and sells a number of products,including a standard motor.Data concerning that motor appear below:
 The Automotive Division of Wengert Products,Inc needs 8,000 special heavy-duty motors per year.The Motor Division's variable cost to manufacture and ship this special motor would be $20 per unit.Because these special motors would requires more manufacturing resources than the standard motor,the Motor Division would have to reduce its production and sales of standard motors to outside customers from 40,000 units per year to 27,200 units per year.
What is the total contribution margin on sales to outside customers that the Motor Division would give up if it were to make the special motors for the Automotive Division?
A) $336,000 
B) $537,600 
C) $860,160 
D) $755,200

Quizplus · Accepted Answer

To produce the 8,000 special motors, the Motor Division will have to give up sales of 12,800 of the regular motors to outside customers.
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