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Production Managment

1. (TCO D) When there is a production constraint, a company should emphasize the products with:
the highest unit contribution margins
the highest contribution margin ratios
the highest contribution margin per unit of constrained resource
the highest contribution margins and contribution margin ratios

2. (TCO D) Lindon Company uses 5,000 units of Part X each year as a component in the assembly of one of its products. The company is presently producing Part X internally at a total cost of $80,000 as follows:
Direct Materials...............................................$18,000
Direct Labor......................................................20,000
Variable Manufacturing Overhead................... 12,000
Fixed Manufacturing Overhead....................... 30,000
Total Costs.......................................................80,000
An outside supplier has offered to provide Part X at a price of $13 per unit. If Lindon stops producting the part internally, one-third of the manufacturing overhead would be eliminated.
Required: Prepare a make or buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.

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1. (TCO D) When there is a production constraint, a company should emphasize the products with:
the highest unit contribution margins
the highest contribution margin ratios
the highest contribution ...

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