Merton is considering the introduction of a new truck, to be called Model 103. Each Model 3
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Merton is considering the introduction of a new truck, to be called Model 103. Each Model 3 truck would give a contribution of $2,000. The total engine assembly capacity would be sufficient to produce 5,00 Model 103s per month, and the total metal stamping capacity would be sufficient to produce 4,000 Model 103s. The new truck would be assembled in the Model 101 assembly department, each Model 103 truck requiring only half as much time as a model 101 truck.
(a) Should Merton produce Model 103 trucks?
(b) How high would the contribution on each Model 103 truck have to be before it became worthwhile to produce the new model?
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-1259565403
5th edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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