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30 April, 09:17

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?

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  1. 30 April, 13:01
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    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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