A company can sell all the units it can produce of either Product A or Product B but not both.Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make.If there are 5,000 machine hours available to manufacture a product, income will be
A)$10,000 more if Product A is made.
B)$10,000 less if Product B is made.
C)$10,000 less if Product A is made.
D)the same if either product is made.

Question

Quizplus · Accepted Answer

Product A generates $8 per machine hour ($16/2 hours), while Product B generates $10 per machine hour ($30/3 hours). Therefore, Product B is more profitable per machine hour, and choosing Product A would result in $10,000 less income (5,000 hours * $2 difference).

A Company Can Sell All the Units It Can Produce