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Which order do you select and why?

Which order do you select and why?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CONTRIBUTION MARGIN DECISION Deciding Between Orders You are evaluating orders from two new customers, but you will only be able to accept one of the orders without increasing your fixed costs. Management has directed you to choose the one that is most profitable for the company. Customer A is ordering 500 units and is willing to pay $200 per unit, and these units have a contribution margin of $60 per unit. Customer B is ordering 1000 units and is willing to pay $140 per unit, and these units have a contribution margin ratio of 40%. Which order do you select and why?
Transcribed Image Text:CONTRIBUTION MARGIN DECISION Deciding Between Orders You are evaluating orders from two new customers, but you will only be able to accept one of the orders without increasing your fixed costs. Management has directed you to choose the one that is most profitable for the company. Customer A is ordering 500 units and is willing to pay $200 per unit, and these units have a contribution margin of $60 per unit. Customer B is ordering 1000 units and is willing to pay $140 per unit, and these units have a contribution margin ratio of 40%. Which order do you select and why?
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