Answered: Per Unit Deluxe Toothbrush Toothbrush…

Per Unit Deluxe Toothbrush Toothbrush Standard Sales price $ 88 $ 54 Variable expense 22 18 Contribution margin 66 36 Contribution margin ratio 75.0% 66.7%

Quickbooks Online Accounting

3rd Edition

ISBN:9780357391693

Author:Owen

Publisher:Owen

Chapter5: Operating Activities: Purchases And Cash Payments

Section: Chapter Questions

Problem 4.6C

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Question

Making product mix decisions

Brik, located in San Antonio, Texas, produces two lines of electric toothbrushes: deluxe and standard. Because Erik can sell all the toothbrushes it can produce, the owners are expanding the plant. They are deciding which product line to emphasize. To make this decision, they assemble the following data:

After expansion, the factory will have a production capacity of 4,900 machine hours per month. The plant can manufacture either 65 standard electric toothbrushes or 27 deluxe electric toothbrushes per machine hour.

Requirements

Identify the constraining factor for Brik.
Prepare an analysis to show which product line the company should emphasize.

Per Unit
Deluxe
Toothbrush Toothbrush
Standard
Sales price
$ 88
$ 54
Variable expense
22
18
Contribution margin
66
36
Contribution margin ratio
75.0%
66.7%

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