Superbowl Corporation manufactures two products,Footballs and Helmets.The following annual information was gathered: Total annual fixed costs are $25,000.Assume Superbowl Corporation can sell either 8,000 footballs or 18,000 helmets at full capacity.Which product should Superbowl Corporation sell to maximize profits?

Question

Superbowl Corporation manufactures two products,Footballs and Helmets.The following annual information was gathered:  Total annual fixed costs are $25,000.Assume Superbowl Corporation can sell either 8,000 footballs or 18,000 helmets at full capacity.Which product should Superbowl Corporation sell to maximize profits?

Quizplus · Accepted Answer

To determine which product Superbowl Corporation should sell to maximize profits, we need to calculate the contribution margin per unit and total contribution margin for each product.

Football contribution margin per unit = $60 - $20 = $40 
Helmet contribution margin per unit = $30 - $10 = $20

Football total contribution margin = 8,000 units x $40 = $320,000 
Helmet total contribution margin = 18,000 units x $20 = $360,000

Therefore, the total contribution margin for helmets is higher than that for footballs, making it the better choice for maximizing profits.

Superbowl Corporation Manufactures Two Products,Footballs and Helmets