To maximize total contribution margin,a firm faced with a production constraint should:
A) promote those products having the highest unit contribution margins.
B) promote those products having the highest contribution margin ratios.
C) promote those products having the highest contribution margin per unit of constrained resource.
D) promote those products having the highest contribution margins and contribution margin ratios.

Question

Quizplus · Accepted Answer

When a firm faces a production constraint, it means that the firm has a limited amount of resources to produce its products. This constraint can be in the form of limited labor, machines or raw materials. To maximize the total contribution margin, the firm should promote those products that generate the highest contribution margin per unit of the constrained resource. This is because focusing on products with high unit contribution margins or contribution margin ratios won't be effective if the resources required to produce them are limited. Hence, the best choice in this scenario is option C.

To Maximize Total Contribution Margin,a Firm Faced with a Production