Kitchen Appliances Company manufactures two products: toaster ovens and bread machines.The following data are available: $$\begin{array} { | l | r | r | }
\hline & \text { Toaster Ovens } & \text { Bread Machines } \
\hline \text { Sales price } & \$ 100 & \$ 200 \
\hline \text { Variable costs } & \$ 30 & \$ 150 \
\hline
\end{array}$$ The company can manufacture three toaster ovens per machine hour and two bread machines per machine hour.The company's production capacity is 1,200 machine hours per month.
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What is the contribution margin ratio for toaster ovens?

Question

Kitchen Appliances Company manufactures two products: toaster ovens and bread machines.The following data are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Toaster Ovens } & \text { Bread Machines } \
\hline \text { Sales price } & \$ 100 & \$ 200 \
\hline \text { Variable costs } & \$ 30 & \$ 150 \
\hline
\end{array}$$ The company can manufacture three toaster ovens per machine hour and two bread machines per machine hour.The company's production capacity is 1,200 machine hours per month.
-
What is the contribution margin ratio for toaster ovens?

Quizplus · Accepted Answer

To calculate the contribution margin ratio for toaster ovens, we need to know the unit selling price, unit variable cost, and unit contribution margin for toaster ovens. However, this information is not given in the problem. Therefore, we cannot calculate the contribution margin ratio for toaster ovens with the given information.

Answer: D
 We can calculate the contribution margin ratio for bread machines as follows:

Contribution margin per unit of bread machine = Selling price per unit of bread machine - Variable cost per unit of bread machine
= $200 - $100
= $100

Contribution margin ratio for bread machine = Contribution margin per unit of bread machine / Selling price per unit of bread machine
= $100 / $200
= 0.5
= 50%

Since the contribution margin ratio for bread machines is higher than the contribution margin ratio for toaster ovens (which we do not know), the best choice would be to focus on producing bread machines. However, this assumes that there is a demand for both products and that the company can sell all the bread machines it produces. If there is not enough demand for bread machines, the company may need to produce a mix of both products based on demand, which would require more information on the contribution margin ratio for toaster ovens.

Kitchen Appliances Company Manufactures Two Products: Toaster Ovens and Bread