A company has 10,000 hours of capacity and manufactures two products.Product 1 takes 2 hours per unit.Product 2 takes 3 hours per unit.The contribution margin per unit for Product 1 is $5.The contribution margin per unit for Product 2 is $6.The demand for either product exceeds the factory capacity.Which product or products should be manufactured?
A) 3,000 units of Product 1 and 2,000 units of Product 2
B) 2,500 units of Product 1 and 3,333 units of Product 2
C) make 5,000 units of Product 1 and 0 units of Product 2
D) make 3,333 units of Product 2 and 0 units of Product 1

Question

Quizplus · Accepted Answer

Product 1 has a higher contribution margin per hour ($2.50) compared to Product 2 ($2.00), so maximizing production of Product 1 will yield higher total contribution.

A Company Has 10,000 Hours of Capacity and Manufactures Two