Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 27

ElecPlus Batteries has two different products, AAA and AA batteries. The AA batteries have a contribution margin of $1 per package, and the AAA batteries have a contribution margin of $2 per package. ElecPlus has a capacity for 1 million batteries per month, and both batteries require the same amount of processing time. If a special order for 10,000 AAA exceeds the monthly capacity, should ElecPlus accept the special order?

Step 1 of 2

Decision of choosing the best product of two:

The decision of choosing the best product is based on the contribution margin earned by each product. The product achieving the highest contribution margin is prioritized rather than the least contribution one.