Reconnect Ltd has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: $$\begin{array} { | l | l | l | l | }
\hline \text { Product } & \text { Unit Price } & \text { Unit Variable Cost } & \text { Units Per Hour } \
\hline \text { HX } & \$ 200 & \$ 100 & 8 \
\hline \text { CL } & \$ 300 & \$ 150 &20 \
\hline \text { KB } & \$ 300 & \$ 125 & 15 \
\hline \text { JP } & \$ 100 & \$ 70 & 50 \
\hline
\end{array}$$ Which product should be emphasised last?
A) HX
B) CL
C) KB
D) JP

Question

Reconnect Ltd has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: $$\begin{array} { | l | l | l | l | } 
\hline \text { Product } & \text { Unit Price } & \text { Unit Variable Cost } & \text { Units Per Hour } \
\hline \text { HX } & \$ 200 & \$ 100 & 8  \
\hline \text { CL } & \$ 300 & \$ 150 &20 \
\hline \text { KB } & \$ 300 & \$ 125 & 15 \
\hline \text { JP } & \$ 100 & \$ 70 & 50 \
\hline
\end{array}$$ Which product should be emphasised last?
A) HX
B) CL
C) KB
D) JP

Quizplus · Accepted Answer

The product to be emphasized last is the one with the lowest contribution margin per hour. Calculate the contribution margin per unit (Unit Price - Unit Variable Cost) and then multiply by units per hour for each product. HX has the lowest contribution margin per hour.

Reconnect Ltd Has Equipment That Is in High Demand, but Has