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2 March, 18:57

Logan Company can sell all of the standard and premier products they can produce, but it has limited production capacity. It can produce 8 standard units per hour or 4 premier units per hour, and it has 36,600 production hours available. Contribution margin per unit is $20.00 for the standard product and $23.00 for the premier product. What is the total contribution margin if Logan chooses the most profitable sales mix

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  1. 2 March, 21:11
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    The most profitable sales mix is 288,000 standard units and 0 premier units.

    Explanation:

    8 standard units per hour

    4 premier units per hour

    36,600 production hours available

    For standard units, contribution margin per hour = 8 x $20 = $160

    For premier units, contribution margin per hour = 4 x $23 = $92

    Therefore, most profitable sales mix = 36,000 hours x 8 units per hour of standard product

    = 288,000 standard units and 0 premier units.
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