A paint manufacturing company produces three paint bases of differing quality. Due to throughput limitations (measured in gallons) at their facility, they are unable to meet total demand for their products. In determining which of their products they should produce, what should they consider?

a. The gross profit per unit for each product

b. The operating margin per unit for each product

c. The contribution margin per gallon of throughput for each product

d. None of the above

Hooker Electronics manufactures three different gaming consoles: Model A, Model B, and Model C. Plenty of market demand exists for all models. The table below reports the prices and costs per unit of each product:

	Model A	Model B	Model C
Selling price	$80	$80	$75
Direct materials costs	$5	$5	$5
Direct labor costs ($20 per labor hour)	$40	$20	$40
Variable support costs ($4 per machine hour)	$8	$12	$4
Fixed support costs	$15	$15	$15

Assuming that labor hours are limited (i.e., this is the constrained resource), what is the Contribution Margin per labor hour for Model C?

a. $5.50

b. $26.00

c. $13.00

d. $15.00

Lightning Remote Cars manufactures remote control cars for children. Historically, Lightning Remote Cars has manufactured their own tires they sell. However, a tire manufacturer has recently approached Lightning Remote Cars with an offer to produce their tires for them for $1.40 per tire.

Lightning Remote Cars anticipates needing 50,000 tires this year to meet the demand for their remote control cars. What would be the total impact on operating income if the tires are purchased from the outside supplier?

a. An increase of $2,500

b. A decrease of $2,500

c. An increase of $22,500

d. A decrease of $22,500

Lightning Remote Cars manufactures remote control cars for children. Historically, Lightning Remote Cars has manufactured their own tires they sell. However, a tire manufacturer has recently approached Lightning Remote Cars with an offer to produce their tires for them for $1.40 per tire.

Lightning Remote Cars incurs the following costs in the per-unit production of the tires. Management is wondering whether they should accept the offer:

• $0.25 for direct materials
• $0.80 for direct labor
• $0.30 for variable overhead
• $0.50 for fixed overhead

What would be the increase or decrease in per-tire costs if the tires are purchased from the outside supplier?

a. $0.05 increase per unit

b. $0.05 decrease per unit

c. $0.45 increase per unit

d. $0.45 decrease per unit