effect on total profits

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 4QE: Suppose you are analyzing a firm that is successfully executing a strategy that differentiates its...
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Company XYZ produces and sells two types of calculators: Basic and Scientific. The Basic has a lower selling price per unit compared to the
Scientific. However, the Basic has a higher contribution margin compared to the Scientific. Due to fixed production capacity, the company has a
cap on total production ability. If the company's CEO has decided to shift the sales mix towards producing more Basic calculators. What would be
the effect on total profits?
O a. Total profits would remain the same
O b. Total profits would increase
Oc.
Cannot be determined using the above information
O d. Total profits would decrease
Oe.
None of the given answers
Transcribed Image Text:Company XYZ produces and sells two types of calculators: Basic and Scientific. The Basic has a lower selling price per unit compared to the Scientific. However, the Basic has a higher contribution margin compared to the Scientific. Due to fixed production capacity, the company has a cap on total production ability. If the company's CEO has decided to shift the sales mix towards producing more Basic calculators. What would be the effect on total profits? O a. Total profits would remain the same O b. Total profits would increase Oc. Cannot be determined using the above information O d. Total profits would decrease Oe. None of the given answers
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