A company sells two products with information as follows:
$$\begin{array} { | l | r | r | }
\hline & { \text { A } } & { \text { B } } \
\hline \text { Sales price per unit } & \$ 18 & \$ 26 \
\hline \text { Variable cost per unit } & \$ 7 & \$ 16 \
\hline
\end{array}$$ Products are made by machine.Five units of product A can be made with three machine hours and five units of product B can be made with 0.6 machine hour.If there are no constraints on production or sales of either product,then the company should emphasize sales of product B.

Question

A company sells two products with information as follows:
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { A } } &  { \text { B } } \
\hline \text { Sales price per unit } & \$ 18 & \$ 26 \
\hline \text { Variable cost per unit } & \$ 7 & \$ 16 \
\hline
\end{array}$$ Products are made by machine.Five units of product A can be made with three machine hours and five units of product B can be made with 0.6 machine hour.If there are no constraints on production or sales of either product,then the company should emphasize sales of product B.

Quizplus · Accepted Answer

The contribution margin per machine hour is higher for product B, making it more profitable to emphasize its sales.

A Company Sells Two Products with Information as Follows Products Are Made by Machine