You are the Sales Manager for your company and you are evaluating orders from two customers but can accept only one of the orders because of your companys limited capacity.

The first order is for 100 units of a product with a contribution margin ratio of 60% and a selling price of $1,000.

The second order is for 500 units of a product with a contribution margin ratio of 20% and a selling price of $800. The incremental fixed costs are the same for both orders. Which order do you accept and why?

Scores:

Definition(s) provided 1 mark

Solution 6 marks

References 1 mark

Correct use of source of reference 1 mark

Secondary post 1 mark