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Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne’s creations, only one pot can be fired in the kiln at a time. Information about each model follows:     Square  Round Sales price $71 157 Variable cost $21 101 Firing time 2.5 hrs  3.5 hrs       Assume that Anne can sell as many pots as she can create but that she is limited as to the number of hours that the kiln can be run.Compute the contribution margin per unit and contribution margin per hour of firing time.   Which type of pot should Anne produce to maximize her short-term profit? Square Ceramic Pot Round Ceramic Pot Both

Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne’s creations, only one pot can be fired in the kiln at a time. Information about each model follows:     Square  Round Sales price $71 157 Variable cost $21 101 Firing time 2.5 hrs  3.5 hrs       Assume that Anne can sell as many pots as she can create but that she is limited as to the number of hours that the kiln can be run.Compute the contribution margin per unit and contribution margin per hour of firing time.   Which type of pot should Anne produce to maximize her short-term profit? Square Ceramic Pot Round Ceramic Pot Both

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11E
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Anne Sugar makes large ceramic pots for use in outdoor landscaping. She currently has two models, one square and the other round. Because of the size of Anne’s creations, only one pot can be fired in the kiln at a time. Information about each model follows:

 

   Square  Round
Sales price $71 157
Variable cost $21 101
Firing time 2.5 hrs  3.5 hrs
     


Assume that Anne can sell as many pots as she can create but that she is limited as to the number of hours that the kiln can be run.

Compute the contribution margin per unit and contribution margin per hour of firing time.

 

Which type of pot should Anne produce to maximize her short-term profit?

  • Square Ceramic Pot
  • Round Ceramic Pot
  • Both
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