The Tipbox Tool Company has two products: a plain circular saw and a professional circular saw. The plain saw sells for $50 and has a variable cost of $35. The professional saw sells for $100 and has a variable cost of $60.
1. Compute contribution margins and contribution-margin ratios for plain and professional saws.
2. The demand is for more units than the company can produce. There are only 40,000 machine hours of manufacturing capacity available. Four plain saws can be produced in the same average time (1 hour) needed to produce one professional saw. Compute the total contribution margin for 40,000 hours for plain saws only and for professional saws only. Which product is the best use of machine hours?
3. Use two or three sentences to state the major lesson of this problem.

  • CreatedNovember 19, 2014
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