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Scenario: Easton Corporation makes two different boat anchors a traditional fishing anchor and a...

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Accounting

Scenario: Easton Corporation makes two different boat anchors a traditional fishing anchor and a high-end yacht anchor using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company is currently operating at full capacity and has been doing so for nearly 2 years. Bjorn Borg, the company's CEO, wants to cut back on production of the fishing anchor so that the company can make more yacht anchors. He says that this is a "no-brainer" because the contribution margin of the yacht anchor is so much higher.

Please use the following questions below to develop your discussion response.

  • How is the contribution margin per unit of limited resource different from the contribution margin?
  • What role might contribution margin per unit of limited resource play in this decision?
  • How would you respond to CEO Borg?

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