Shorebuck's Coffee can sell all the units it can produce of either latte or cappuccino but not both.Latte has a unit contribution margin of $45 and takes three machine hours to make and cappuccino has a unit contribution margin of $32 and takes two machine hours to make.There are 1,300 machine hours available to manufacture a product.What should Shorebuck's do?
A)Make latte which creates $13 more profit per unit than cappuccino does.
B)Make cappuccino which creates $1 more profit per constraint than latte does.
C)Make cappuccino because more units can be made and sold than latte.
D)The same total profits exists regardless of which product is made.

Question

Quizplus · Accepted Answer

The contribution margin per machine hour for latte is $15 ($45/3 hours) and for cappuccino is $16 ($32/2 hours). Therefore, cappuccino generates $1 more profit per machine hour, which is the constraint.

Shorebuck's Coffee Can Sell All the Units It Can Produce