Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne's creations, only one pot can be fired in the kiln at a time. Information about each model follows: Sales price Variable cost Firing time Round $ 148 $50 3.5 hours Assume Anne can sell as many pots as she can create but is limited as to the number of hours that the kiln can be run. Required: 1. Compute the contribution margin per unit and contribution margin per hour of firing time. Contribution Margin per Unit Contribution Margin per Hour Square $ 100 $ 25 2.5 hours Square Ceramic Pot Round Ceramic Pot 2. Which type of pot should Anne produce to maximize her short-term profit?
Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne's creations, only one pot can be fired in the kiln at a time. Information about each model follows: Sales price Variable cost Firing time Round $ 148 $50 3.5 hours Assume Anne can sell as many pots as she can create but is limited as to the number of hours that the kiln can be run. Required: 1. Compute the contribution margin per unit and contribution margin per hour of firing time. Contribution Margin per Unit Contribution Margin per Hour Square $ 100 $ 25 2.5 hours Square Ceramic Pot Round Ceramic Pot 2. Which type of pot should Anne produce to maximize her short-term profit?
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round.
Because of the size of Anne's creations, only one pot can be fired in the kiln at a time. Information about each model follows:
Square
$ 100
$ 25
Sales price
Variable cost
Firing time
Round
$ 148
$50
3.5 hours
Assume Anne can sell as many pots as she can create but is limited as to the number of hours that the kiln can be run.
Required:
1. Compute the contribution margin per unit and contribution margin per hour of firing time.
Contribution Margin per Unit
Contribution Margin per Hour
2.5 hours
Square Ceramic
Pot
Round
Ceramic Pot
2. Which type of pot should Anne produce to maximize her short-term profit?
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