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Stanley's Candies is considering building a new plant in Europe
Stanley's Candies is considering building a new plant in Europe. It predicts sales at the new plant to be 40,000 units at $4.00/unit. Below is a listing of estimated expenses.
|
Category |
Total Annual Expenses |
% of Annual Expense that are Fixed |
|
Materials |
$20,000 |
10% |
|
Labor |
$30,000 |
20% |
|
Overhead |
$50,000 |
40% |
|
Marketing/Admin |
$10,000 |
60% |
A European firm was contracted to sell the product and will receive a commission of 10% of the sales price. No U.S. home office expenses will be allocated to the new facility.
The contribution margin ratio for Stanley's Candies is
A) 157.50%.
B) 57.50%.
C) 42.50%.
D) 52.50%.
Expert Solution
PFA
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