Question
28.A company produces two kinds of can openers: one with longer handles and one with shorter handles. The longer opener uses better materials and has
28.A company produces two kinds of can openers: one with longer handles and one with shorter handles. The longer opener uses better materials and has a better design for hand support. During the past year, 200,000 shorter openers and 50,000 longer openers were produced and sold. Fixed costs amount to $500,000. If the shorter openers were dropped from production, $180,000 of the fixed costs would be avoided. If the longer openers were dropped, $90,000 of the fixed costs would be avoided.
Shorter Longer
Variable expenses/unit $40 $86
Sales price/unit $44 $90
The contribution margin of the shorter and longer can openers, respectively is
a. | $200,000/$800,000
| c. | $8000,000/$4,300,000 |
b. | $620,000/110,000 | d. | $800,000/$200,000 |
. If the company stops producing the longer opener, what will be the effect on the companys income?
a. | Decrease by $200,000 | c. | Decrease by $800,000 |
b. | Decrease by $110,000 | d. | Decrease by $620,000
|
. If the company stops producing the shorter opener, what effect on company income?
a. Decrease by $200,000 c. Decrease by $800,000
b. Decrease by $110,000 d. Decrease by $620,000
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