This is the exercise. You are evaluating orders from two new customers, but you will only be
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Question:
This is the exercise.
You are evaluating orders from two new customers, but you will only be able to accept one of the orders without increasing your fixed costs. Management has directed you to choose the one that is most profitable for the company. Customer A is ordering 500 units and is willing to pay $200 per unit, and these units have a contribution margin of $60 per unit. Customer B is ordering 1,000 units and is willing to pay $140 per unit, and these units have a contribution margin ratio of 40%. Which order do you select and why?
After computation, I had for customer A and Income of $29,200 and for customer B $55,200. In class the professor said to choose customer A. I feel my calculations were wrong somehow. Could you explained it?
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