Westfield Corporation makes two different boat anchors?a traditional fishing anchor and a high-end yacht anchor?using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity and has been doing so for nearly two years. Ralph Sampson, the company's CEO, want to cut back on production of the fishing anchor so that the company can make more yacht anchors. He says that this is a "no-brainer" because the contribution margin of the yacht anchor is so much higher.
Write a short memo to Ralph Sampson describing the analysis that the company should do before it makes this decision and any other considerations that would affect the decision.
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Below are my answers.
Date : [date]
To : Ralph Sampson
Chief Executive Officer
From : [name]
Subject : Cost-Volume-Profit Analysis
First, contribution margin is the difference between a product's price and its ...
Contribution margin is featured.
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