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Unformatted text preview: 1512 1525 (continued) (1) (continued) Lee should produce 3,000 floor lamps (which will use 9,000 machine hours and leave 2,400 machine hours for the production of desk lamps) and 1 ,200 (2,400 hours 2 hours per floor lamp) desk lamps. The total contribution margin earned per month is: 3,000 floor lamps @ $15.00 $45,000 1,200 desk lamps @ $ 6.00 7 ,200 Total $52,200 (2) Leasing an additional machine providing 360 more hours per month can provide an increase in contribution margin by producing 180 (360 hours 2 machine hours per lamp) more desk lamps (no more floor lamps could be sold). The increase in total contribution margin from the extra desk lamps would be 360 machine hours x $3 contribution margin per machine hour = $1 ,080 or 180 floor lamps x $6 contribution margin per lamp = $1,080 The company would not want to pay more than $1 ,080 per month to lease the machine. MAKING EVALUATIONS 1526 While the percentage of coffee drinkers didn't shift during the decade, the number who purchased coffee beans rather than ground coffee increased. Maxwell House probably considered factors such as the following: (a) the effect of the switch in customer preferences on its sales, (b) how much of the market it could gain back by lowering its prices (after considering the actions its competitors might take), (c) the incremental costs and revenues of purchasing and marketing coffee beans, (d) the available costs of reducing its volume of ground coffee, (e) the effect of a new product mix on its breakeven point or the number of units it would have to sell in order to earn a desired profit. ...
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This homework help was uploaded on 04/08/2008 for the course ACC 102 taught by Professor Drucker during the Fall '07 term at Coastal Carolina University.
- Fall '07