A tool company sells a plain (price $50, variable cost $35) and a professional (price $100, variable cost $60) circular saw. It takes one machine-hour to produce a professional and 15 minutes to produce a regular saw. There are 40,000 machine-hours available and demand is more than they can produce. a) Compute contribution margins and contribution margin ratios for each saw. b) Ifall machine hours are used, compute the total contribution margin for plain saws only and professional saws only. Which saw should be produced?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

A tool company sells a plain (price $50, variable cost $35) and a professional (price $100, variable cost $60) circular saw. It takes one machine-hour to produce a professional and 15 minutes to produce a regular saw. There are 40,000 machine-hours available and demand is more than they can produce. a) Compute contribution margins and contribution margin ratios for each saw. b) Ifall machine hours are used, compute the total contribution margin for plain saws only and professional saws only. Which saw should be produced?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 4 images

Blurred answer
Knowledge Booster
Theory of Constraints (TOC)
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education