Due to limited production space, Computer Inc needs to adjust its sales mix. Current production is 500 flash drives (contributio
n margin $7 each) and 500 charging cords (contribution margin $8 each). There has been a surge in sales on the flash drives and Computer Inc could sell 1000 of them if they could make them! There is only space to manufacture a total of 1150 items. What should they do?
Computer Inc should produce and sell 500 charging cords since their contribution margin is the highest, resulting in a gross profit of $8 per unit x 500 units = $4,000. And produce and sell 650 flash drives with a contribution margin of $7 per unit which results in a gross profit = $7 x 650 units = $4,550.
Explanation:
Companies must focus on producing and selling the products that generate them the largest profit.
Dividend yield is a company's total annual dividend payments divided by its number of shares. Since Fred and Torrie are more interested in how much dividends their investment will yield, one metric that will prove useful is the dividend yield per share. Contribution margin and current ratio are about how well the company is being run and does not directly reflect divided. Dividend payout ratio has no relationship between invested funds and dividend, it only compares dividend against reported profit.
