Lit Furniture manufactures a small table and a large table.The small table sells for $800,has variable costs of $780 per table,and takes 8.00 labor hours to manufacture.The large table sells for $1,500,has variable costs of $900,and takes 15 direct labor hours to manufacture.If the company has no sales limitations on either product,it should make and sell as many of the large tables as possible to maximize operating income.

Question

Quizplus · Accepted Answer

Since the large table has a higher contribution margin per unit ($600 compared to $20 for the small table), producing and selling more of the large table would result in a higher overall contribution margin for the company, thus maximizing operating income.

Lit Furniture Manufactures a Small Table and a Large Table