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FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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All Terrain Tires manufactures three different off-road ATV tires: Model A, Model B, and Model C. Plenty of market demand exists for all models. The table below reports the prices and costs per unit of each product:

 

Model A

Model B

Model C

Selling price

$22

$30

$35

Direct materials costs

$2

$5

$8

Direct labor costs ($15 per labor hour)

$15

$10

$14

Variable support costs ($3 per machine hour)

$3

$8

$6

Fixed support costs

$100

$100

$100

Assuming that the company is constrained on machine hours, and all units produced can be sold, then which model is the most profitable? 

Group of answer choices
Model B
Model C
Model A
Model B and C are equally profitable.
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