Chapter AB, Problem 5P

To determine

Profitability: The profitability also known as return on sales represents the net profit earned as a percentage of the total turnover.

From the information given in the question, determine the following-

1. Whether there is sufficient required capacity of kiln to satisfy the demand.
2. The production plan for the year to maximise the profits.
3. The total contribution margin for the production plan proposed in (2).
4. Incremental costs to be incurred to operate the kiln for more than 2000 hours .
5. Minimum acceptable selling price of the new product − glazed Venetian bricks if its cost is $820 and would require 10 hours in the kiln per pallet.
6. Is the commission of 5% of gross revenue to the salespersons motivating enough to sell the products most aggressively?