The following information is provided for two products: $$\begin{array} { l c c }
& \text { Product X } & \text { Product } Y \
\text { Selling price per unit } & \$ 3 5& \$ 2 5 \
\text { Variable cost per unit } &2 0& 15
\end{array}$$ Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products.Expected sales for Product X are 6,000 units,and expected sales for Product Y are 8,000 units.Which product should be sold and why?
A) Product Y should be sold solely because the expected demand for this product is greater than the expected demand for Product X.
B) Product Y should be sold because sales of this product will provide a greater profit.
C) Product X should be sold because it provides a greater contribution margin per unit.
D) Product X should be sold because sales of this product will provide a greater profit.

Question

The following information is provided for two products: $$\begin{array} { l c c } 
& \text { Product X } & \text { Product } Y \
\text { Selling price per unit } & \$ 3 5& \$ 2 5  \
\text { Variable cost per unit } &2 0& 15
\end{array}$$ Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products.Expected sales for Product X are 6,000 units,and expected sales for Product Y are 8,000 units.Which product should be sold and why?
A) Product Y should be sold solely because the expected demand for this product is greater than the expected demand for Product X.
B) Product Y should be sold because sales of this product will provide a greater profit.
C) Product X should be sold because it provides a greater contribution margin per unit.
D) Product X should be sold because sales of this product will provide a greater profit.

Quizplus · Accepted Answer

Product X has a contribution margin of $15 per unit ($35 - $20) and expected sales of 6,000 units, leading to a total contribution of $90,000. Product Y has a contribution margin of $10 per unit ($25 - $15) and expected sales of 8,000 units, leading to a total contribution of $80,000. Therefore, Product X will provide a greater profit despite lower expected sales.

The Following Information Is Provided for Two Products Assume the Products Will Be Sold in a Store Where