2C2D CERVINE CORPORATION MAKES TWO TYPES OF MOTORS FOR USE IN VARIOUS...
263.
CSO: 2C2g
LOS: 2C2d
Cervine Corporation makes two types of motors for use in various products. Operating
data and unit cost information for its products are presented below.
Product A
Product B
Annual unit capacity
10,000
20,000
Annual unit demand
10,000
20,000
Selling price
$100
$80
Variable manufacturing cost
53
45
Fixed manufacturing cost
10
10
Variable selling & administrative
10
11
Fixed selling & administrative
5
4
Fixed other administrative
2
0
Unit operating profit
$ 20
$10
Machine hours per unit
2.0
1.5
Cervine has 40,000 productive machine hours available. The relevant contribution
margins, per machine hour for each product, to be utilized in making a decision on
product priorities for the coming year, are
a.
$17.00
$14.00.
b.
$18.50
$16.00.
c.
$20.00
$10.00.
d.
$37.00
$24.00.