Austin Wool Products Purchases Raw Wool and Processes It into Yarn

Multiple Choice

Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores, or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:



Each month 4,000 spindles of yarn are produced that can either be sold outright or processed into afghans.

-If Austin produced and sold 4,000 afghans and zero spindles of yarn the total contribution margin would be closed to:

A) $24,000.
B) $40,000.
C) $60,000.
D) $8,000.