Super Company manufactures two products, A and B.The following information was gathered: $$\begin{array} { l c c }
& \text { A } & \text { B } \
\text { Selling price per unit } & \$ 54.00 & \$ 66.00 \
\text { Variable cost per unit } & 39.00 & 54.00 \
& & \
\text { Total fixed costs } & & \$ 30,000
\end{array}$$ Assume Super Company could produce and sell any mix of products A and B at full capacity.If product A takes twice as long to manufacture as product B and only 120,000 hours of plant capacity are available, it is best for Super Company to produce _____.
A)only A
B)either A or B, there is no difference
C)an equal number of A and B
D)only B

Question

Super Company manufactures two products, A and B.The following information was gathered: $$\begin{array} { l c c } 
& \text { A } & \text { B } \
\text { Selling price per unit } & \$ 54.00 & \$ 66.00 \
\text { Variable cost per unit } & 39.00 & 54.00 \
& & \
\text { Total fixed costs } & & \$ 30,000
\end{array}$$ Assume Super Company could produce and sell any mix of products A and B at full capacity.If product A takes twice as long to manufacture as product B and only 120,000 hours of plant capacity are available, it is best for Super Company to produce _____.
A)only A
B)either A or B, there is no difference
C)an equal number of A and B
D)only B

Quizplus · Accepted Answer

To maximize profit, Super Company should focus on the contribution margin per unit of time. Product B, despite a lower absolute contribution margin, requires less time to produce, making it more profitable per hour of manufacturing time given the limited plant capacity.

Super Company Manufactures Two Products, a and B Assume Super Company Could Produce and Sell Any Mix of Was