Question

Buzz Appliances manufactures two products: Food Processors and Espresso Makers. The following data are available: Sales price Variable costs Food Processors Espresso Makers $165.00 $235.00 $80.00 $200.00 The company can manufacture either two food processors per machine hour or three espresso machines per machine hour. The company's production capacity is 1,200 machine hours per month. What is the contribution margin ratio for food processors? O A. 51.52% OB. 5.15% O C. 14.89% OD. 30%

Answer 1

1.

Sales price = $165

Variable cost = $80

Contribution margin = Sales price - Variable cost

= 165 - 80

= $85

Contribution margin ratio = Contribution margin/Sales price

= 85/165

= 51.52%

Correct option is (A)

2.

Companies that are considered price takers usually employ the target costing approach to pricing products.

Correct option is (C)

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