Problem: KX Corporation makes stools and tables. The company can sell as many stools and/or tables as it can produce, buts machine-hour capacity is limited. Revenue and cost data for each unit are given as follows:
Stool Table
Selling Price $7.50 $18.00
Variable Costs $6.00 $15.50
It takes 1 machine hour to make a stool and 2 machine hours to per table. Total fixed costs for KX corporation amounts to $25,000 annually and would not change under any production modifications. Give this information KX should:
a) produce tables rather than stools
b) produce stools rather than tables
c) be equally well off either producing all tables or all stools.