A European company manufactures three types of plasma televisions in separate plants. Their costs and prices are: Type of TV Fixed Costs Variable Cost per Unit Price per Unit MB-2000 € 10,000,000 € 500 € 800 MB-2400 € 30,000,000 € 700 € 1,300 MB-2800 € 40,000,000 € 1,000 € 1,500 Assume all three plants are operating below capacity. If a customer decides to buy one of these three TVs, which model should the company promote?

The contribution margins per unit of the three types of plasma televisions are: Type of TV Contribution Margin per Unit MB-2000 €300 (€800–€500) MB-2400 €600(€130–€700) MB-2800 €500 (€1,500–€1000) The MB-2400 has the highest contribution margin per unit and is the model that the company prefers to sell. The fixed costs are irrelevant in this decision. The existence of excess capacity in this example simplifies the decision choice.

Question 12.11: A European company manufactures three types of plasma televi...

Management Accounting in a Dynamic Environment

A European company manufactures three types of plasma televisions in separate plants. Their costs and prices are:

Type of TV	Fixed Costs	Variable Cost per Unit	Price per Unit
MB-2000	€ 10,000,000	€ 500	€ 800
MB-2400	€ 30,000,000	€ 700	€ 1,300
MB-2800	€ 40,000,000	€ 1,000	€ 1,500

Assume all three plants are operating below capacity. If a customer decides to buy one of these three TVs, which model should the company promote?

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