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Unformatted text preview: candies. The candy making equipment is special-purpose equipment that was constructed specifically to make this particular candy. The equipment has no resale value and does not wear out through use. A salesperson is paid $2,000 per month plus a commission of 5% of sales to market the honey drop candies. The company had enjoyed robust sales of the candies for several years, but the recent entrance of a competing product into the marketplace has depressed sales of the candies. The management of the company is now wondering whether it would be more profitable to sell all of the honey rather than converting some of it into candies. Required: 1. What is the incremental contribution margin per container from further processing the honey into candies? 2. What is the minimum number of containers of candy that must be sold each month to justify the continued processing of honey into candies? Explain. Show all computations. (CMA, adapted)...
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This note was uploaded on 10/20/2010 for the course AD abc123 taught by Professor Cat during the Summer '09 term at City University of Hong Kong.
- Summer '09