You are the Sales Manager for your company and you are evaluating orders from two customers but can accept only one of the orders because of your company’s limited capacity. The first order is for 100 units of a product with a contribution margin ratio of 60% and a selling price of $1,000. The second order is for 500 units of a product with a contribution margin ratio of 20% and a selling price of $800. The incremental fixed costs are the same for both orders. Which order do you accept?
You are the Sales Manager for your company and you are evaluating orders from two customers but can accept only one of the orders because of your company’s limited capacity. The first order is for 100 units of a product with a contribution margin ratio of 60% and a selling price of $1,000. The second order is for 500 units of a product with a contribution margin ratio of 20% and a selling price of $800. The incremental fixed costs are the same for both orders. Which order do you accept?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You are the Sales Manager for your company and you are evaluating orders from two customers but can accept only one of the orders because of your company’s limited capacity.
The first order is for 100 units of a product with a contribution margin ratio of 60% and a selling price of $1,000.
The second order is for 500 units of a product with a contribution margin ratio of 20% and a selling price of $800. The incremental fixed costs are the same for both orders. Which order do you accept?
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