3. Sigma Toys Company produces three toys, all of which are so popular that demand for them exceeds production capacity. In the short run, the company must rank order toys based on their profitability, and allocate more capacity to produce the most profitable toy. Given the following information, which toy should be given the top priority in allocating capacity?

Toy A Toy B Toy C Price per unit $50 $60 $70 Variable cost per unit $20 $15 $40 Contribution margin per unit $30 $45 $30 Machine hours required per unit 0.2 0.4 0.3

A. Toy A B. Toy B C. Toy C D. They should all be given the same priority 4. Which of the following is an example of a sunk cost in a decision to replace or repair your old car? A. The cost of a new engine to replace the broken engine of the old one B. The cost of the old car you purchased three years ago C. Dealer incentives to discount the price of the new car D. Insurance premiums on the old and the new cars Toy A Toy B Toy C Price per unit $50 $60 $70 Variable cost per unit $20 $15 $40 Contribution margin per unit $30 $45 $30 Machine hours required per unit 0.2 0.4 0.3