NEKP Inc.sells two versions of its product: Standard and Deluxe.The Standard model has a 15 percent profit margin and the Deluxe model has a 17 percent profit margin.The Standard model has a 30 percent contribution margin and the Deluxe has a 23 percent contribution margin.If other factors are equal, which product should NEKP emphasize to its customers?
A)the Standard model
B)the Deluxe model
C)Selling either results in the same additional income for the company.
D)Not enough information is given.

Question

Quizplus · Accepted Answer

The Standard model should be emphasized because it has a higher contribution margin (30 percent) compared to the Deluxe model (23 percent), indicating that it contributes more to covering fixed costs and generating profit per unit sold. Profit margin indicates the percentage of profit from each sale, but contribution margin is more relevant for deciding which product to emphasize for covering fixed costs and maximizing profit.

NEKP IncSells Two Versions of Its Product: Standard and Deluxe