In attempting to improve profitability when faced with a bottleneck related to hours that is involved in the production of two or more products, which of the following is most important for management to consider?
A) Contribution margin per unit for each product
B) Time required for each different product passing through the bottleneck
C) Selling price or sales revenue generated by each product produced through the bottleneck
D) Contribution margin per bottleneck hour for each product

Question

Quizplus · Accepted Answer

The most important factor to consider when facing a bottleneck related to hours is the contribution margin per bottleneck hour for each product. This will help management determine which products are more profitable to produce given the limited bottleneck resources. Option A, contribution margin per unit, is important but does not take into consideration the time required for production, which is the bottleneck issue. Option B, time required for each product passing through the bottleneck, is relevant but needs to be combined with contribution margin information to make decisions about production. Option C, selling price or sales revenue generated by each product, is important but does not take into account the bottleneck issue and the limited hours available for production.

In Attempting to Improve Profitability When Faced with a Bottleneck