We Can Reach It produces ladders for household use. The company makes two types: step ladders and 12-foot adjustable ladders. Demand for the products is so high that We Can Reach It can sell as many of each size as it can produce. The company uses the same machinery to produce both products. The machinery can only run for 1,990 hours per period. We Can Reach It can produce 12, 12-foot ladders every hour, whereas it can produce 16 step ladders in the same amount of time. Fixed costs amount to $120,800 per period. Sales prices and variable costs are as follows:   Step ladder 12-foot ladder Sales price per unit $21.70 $37.00 Variable cost per unit $8.75 $23.30 Contribution Margin per unit     1. Calculate the Contribution Margin per machine hour.   Step ladder 12-foot ladder Ladders produced per hour     Contribution margin per ladder type     Contribution margin per machine hour     2. To maximize profit, which product should they emphasize:     3. What will the company's operating income be? We Can Reach It Sales Revenue   Variable Costs   Contribution Margin   Fixed Costs   Operating Income

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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We Can Reach It produces ladders for household use. The company makes two types: step ladders and 12-foot adjustable ladders. Demand for the products is so high that We Can Reach It can sell as many of each size as it can produce. The company uses the same machinery to produce both products. The machinery can only run for 1,990 hours per period. We Can Reach It can produce 12, 12-foot ladders every hour, whereas it can produce 16 step ladders in the same amount of time. Fixed costs amount to $120,800 per period.

Sales prices and variable costs are as follows:

  Step ladder 12-foot ladder
Sales price per unit $21.70 $37.00
Variable cost per unit $8.75 $23.30
Contribution Margin per unit    


1. Calculate the Contribution Margin per machine hour.

  Step ladder 12-foot ladder
Ladders produced per hour    
Contribution margin per ladder type    
Contribution margin per machine hour    


2. To maximize profit, which product should they emphasize:    

3. What will the company's operating income be?

We Can Reach It
Sales Revenue  
Variable Costs  
Contribution Margin  
Fixed Costs  
Operating Income        
 
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