When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on:
A)selling price per unit
B)contribution margin per unit
C)contribution margin per unit of the constraining resource
D)unit sales volume

Question

Quizplus · Accepted Answer

The best ranking criteria for a multi-product factory operating at full capacity is the contribution margin per unit of the constraining resource. This helps to ensure that the products with the highest contribution margin per unit of the limited resource are given priority, maximizing the factory's profitability. Option A (selling price per unit) does not take into account the production costs and profitability of the product, while option B (contribution margin per unit) does not consider the limited resource. Option D (unit sales volume) does not account for profitability and ignores the factory's full capacity.

When a Multi-Product Factory Operates at Full Capacity, Decisions Must