All Terrain Tires manufactures three different off-road ATV tires: Model A, Model B, and Model C. Plenty of market demand exists for all models. The table below reports the prices and costs per unit of each product: Selling price Direct materials cost Model A Model B Model C $? $75 $83 $8 $8 $8 Direct labor costs ($15 per labor hour) $23 $23 $45 Variable support costs ($5 per machine hour) $5 $10 $15 Fixed support costs $15 $15 $15 Assuming that machine hours are limited (i.e., this is the constrained resource), at what price does Model A become the most profitable model to produce?
All Terrain Tires manufactures three different off-road ATV tires: Model A, Model B, and Model C. Plenty of market demand exists for all models. The table below reports the prices and costs per unit of each product: Selling price Direct materials cost Model A Model B Model C $? $75 $83 $8 $8 $8 Direct labor costs ($15 per labor hour) $23 $23 $45 Variable support costs ($5 per machine hour) $5 $10 $15 Fixed support costs $15 $15 $15 Assuming that machine hours are limited (i.e., this is the constrained resource), at what price does Model A become the most profitable model to produce?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:All Terrain Tires manufactures three different off-road ATV tires: Model A, Model B, and Model C. Plenty of market
demand exists for all models. The table below reports the prices and costs per unit of each product:
Selling price
Direct materials cost
Model A Model B Model C
$ ?
$75
$83
$8
$8
$8
Direct labor costs ($15 per labor hour)
Variable support costs ($5 per machine hour)
$23
$23
$45
$5
$10
$15
Fixed support costs
$15
$15
$15
Assuming that machine hours are limited (i.e., this is the constrained resource), at what price does Model A become
the most profitable model to produce?
Select one:
0
a. Any price above $83
O b. Any price above $36
Oc. Any price above $53
Od. None of these options are correct.
°
e. Any price above $70
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