Sammie’s Pizza sells an average of 150 pizzas per week, of which 20% are single-topping pizzas and 80% are supreme pizzas with multiple toppings. Singles sell for $8 each and incur variable costs of $2. Supremes sell for $12 each and incur variable costs of $6. Which pizza should Sammie’s Pizza promote to maximize profits? a. Singles because they contribute the highest total contribution margin. b. Supremes because they have the highest contribution margin ratio. c. Singles because they have the highest contribution margin ratio. d. Both should be promoted equally because they have the same contribution margin per unit.
Sammie’s Pizza sells an average of 150 pizzas per week, of which 20% are single-topping pizzas and 80% are supreme pizzas with multiple toppings. Singles sell for $8 each and incur variable costs of $2. Supremes sell for $12 each and incur variable costs of $6. Which pizza should Sammie’s Pizza promote to maximize profits? a. Singles because they contribute the highest total contribution margin. b. Supremes because they have the highest contribution margin ratio. c. Singles because they have the highest contribution margin ratio. d. Both should be promoted equally because they have the same contribution margin per unit.
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 20E
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Sammie’s Pizza sells an average of 150 pizzas per week, of which 20% are single-topping pizzas and 80% are supreme pizzas with multiple toppings. Singles sell for $8 each and incur variable costs of $2. Supremes sell for $12 each and incur variable costs of $6.
Which pizza should Sammie’s Pizza promote to maximize profits?
a. Singles because they contribute the highest total contribution margin.
b. Supremes because they have the highest contribution margin ratio.
c. Singles because they have the highest contribution margin ratio.
d. Both should be promoted equally because they have the same contribution margin per unit.
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