Highest contribution margin or contribution margin per hour

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Reference no: EM13145123

A company produces products A, B, and C. The company has excess capacity. Products A, B, and C have a contribution margin of 10, 15, and 20, respectively. Products A, B, and C have a contribution margin per hour of 10, 5, and 6.67 per contribution margin per hour, respectively. Assume that the scarce resource for the firm is time, that is if an hour more is spent on producing one more product, there would be an hour less spent on producing another product. The company should produce:

a. Product A because it has the highest contribution margin per hour.

b. Product C because it has the highest contribution margin.

c. Either Product A or C because they have the highest contribution margin or contribution margin per hour.

d. The answer cannot be determined because we do not know the number of available machine hours.

Reference no: EM13145123

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