Question

Granfiield Corporation manufactures two​ products, Product A and Product B. The following information was​ available: Product A Product B Selling price per unit ​$41 ​$29 Variable cost per unit 32 19 Total fixed costs ​$23,000 If Granfield Corporation could produce and sell either​ 10,400 units of Product A or​ 5,900 units of Product B at full​ capacity, it should produce and sell​ ________.
A. ​6,556 units of A and​ 5,900 units of b
B. ​2,556 units of B and​ 2,300 units of A
C. ​5,900 units of B and none of A
D. ​10,400 units of A and none of B

Answer 1

Answer:

D. ​10,400 units of A and none of B

Explanation:

product A

contribution margin = $41 - $32

                                 = $9

product B

contribution margin = $29 - $19

                                 = $10

at full capacity:

contribution for product A = 10400*$9

                                            = $93600

contribution for product B = 5900*$10

                                            = $59000

Since the contribution is higher for product A, The company should produce 10400 units of product A and none of B.