A company can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make. If there are 1,000 machine hours available to manufacture a product, income will be
A) $2,000 more if Product A is made.
B) $2,000 less if Product B is made.
C) $2,000 less if Product A is made.
D) the same if either product is made.

Question

Quizplus · Accepted Answer

Product A yields $8 per machine hour ($16/2 hours), while Product B yields $10 per machine hour ($30/3 hours). With 1,000 machine hours, Product B generates $2,000 more income than Product A.

A Company Can Sell All the Units It Can Produce