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Jones Company sells an average of 200 chairs per week, of which 30% are regular chairs and 70% are executive chairs. Regular chairs sell for $100 each and incur variable costs of $62. Executive chairs sell for $170 each and incur variable costs of $125. Which type of chair should Jones Company promote to maximize profits?

Respuesta :

Answer:

Executive chair because it contributes the highest contribution margin.

45 vs 38

Explanation:

The benefits are maximum when the maximum difference between total income and total costs is reached.

200,00  

60,00 30%  

140,00 70%  

 

Regular Chairs Executive chairs

Quatity       60,00 140,00

Price Unit 100         170

Cost Unit 62         125

 

 

Revenue 6000 23800

Cost 3720 17500

       2280 6300

               

Max.Profit  38              45

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