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Domino Co.

Use the following information to answer questions 1 through 3.

Domino Co. manufactures three sizes of dog carriers: small, medium, and large. Potential sales include 100 units of small, 120 units of medium, and 100 units of large per month. The barrier in reaching the sales level revolves around the maximum machine hours available, 600 per month. Product information is provided below.

Unit Small Medium Large

Selling price \$30 \$50 \$100
Costs
Variable 18 30 46
Fixed 8 10 24

Machine Hours per Unit 2 4 10

1. What is the contribution margin per machine-hour for small units?
a. \$10.00.
b. \$ 6.00.
c. \$ 5.40.
d. \$ 3.60
e. none of the above
2. If management incorporates a short-run profit maximizing strategy, which of the three product models should be produced first?
a. Small.
b. Medium.
c. Large.
d. Either medium or large.

3. Using the short-run strategy, how many of each product should be produced per month?
Small Medium Large
a. 0 120 12
b. 100 0 40
c. 100 100 0
d. 100 20 40
e. none of the above

Solution Preview

Use the following information to answer questions 1 through 3.

Domino Co. manufactures three sizes of dog carriers: small, medium, and large. Potential sales include 100 units of small, 120 units of medium, and 100 units of large per month. The barrier in reaching the sales level revolves around the maximum machine hours available, 600 per month. Product information is provided ...

Solution Summary

This solution is comprised of a detailed explanation to answer
1. What is the contribution margin per machine-hour for small units?
2. If management incorporates a short-run profit maximizing strategy, which of the three product models should be produced first?
3. Using the short-run strategy, how many of each product should be produced per month?

\$2.19