Letter Systems Inc. has a limited amount of direct material available for products 1A1 and 2B2. Each unit of 1A1 has a contribution margin of $12 and each unit of 2B2 has a contribution margin of $30. A unit of 2B2 uses three times as much direct material as a unit of 1A1. What is Letter's most profitable sales mix, assuming there is unlimited demand for either product? Make all 2B2. Make all 1A1. Make equal number of units of 1A1 and 2B2. Make three times as many 1A1 as 2B2.
Letter Systems Inc. has a limited amount of direct material available for products 1A1 and 2B2. Each unit of 1A1 has a contribution margin of $12 and each unit of 2B2 has a contribution margin of $30. A unit of 2B2 uses three times as much direct material as a unit of 1A1. What is Letter's most profitable sales mix, assuming there is unlimited demand for either product? Make all 2B2. Make all 1A1. Make equal number of units of 1A1 and 2B2. Make three times as many 1A1 as 2B2.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Letter Systems Inc. has a limited amount of direct material available for products 1A1 and 2B2. Each unit of 1A1 has a contribution margin of $12 and each unit of 2B2 has a contribution margin of $30. A unit of 2B2 uses three times as much direct material as a unit of 1A1. What is Letter's most profitable sales mix, assuming there is unlimited demand for either product?
Make all 2B2.
Make all 1A1.
Make equal number of units of 1A1 and 2B2.
Make three times as many 1A1 as 2B2.
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