Greg's Breads can produce and sell only one of the following two products: $\begin{array}{lll}&\text { Oven } &\text { Contribution } \
&\text { Hours Required } &\text { Margin Per Unit }\
\text { Muffins } & 0.2 & \$ 3 \
\text { Coffee Cakes } & 0.3 & \$ 4
\end{array}$ The company has oven capacity of 1,500 hours. How much will contribution margin be if it produces only the most profitable product?
A)$15,000
B)$20,000
C)$22,500
D)$30,000

Question

Quizplus · Accepted Answer

The contribution margin per oven hour for muffins is $3 / 0.2 = $15, and for coffee cakes is $4 / 0.3 = $13.33. Muffins are more profitable per oven hour. With 1,500 hours, the contribution margin is 1,500 * $15 = $22,500.

Greg's Breads Can Produce and Sell Only One of the Following