Panera can produce and sell only one of the following bakery products: Panera has oven capacity of 1,500 hours. If Panera bakes only the most profitable product, how much will the total contribution margin be?
A) $15,000
B) $20,000
C)$22,500
D) $30,000

Question

Panera can produce and sell only one of the following bakery products:  Panera has oven capacity of 1,500 hours. If Panera bakes only the most profitable product, how much will the total contribution margin be?
A) $15,000 
B) $20,000 
C)$22,500 
D) $30,000

Quizplus · Accepted Answer

For product-mix decisions with constrained resources, companies should select products to produce/sell based on the highest contribution margin per unit of constrained resource which for Panera is the Brioche Bread, $15 per bakery hour ($3/.2 hours). If this is then multiplied by the 41,500 hours, the contribution margin = $15 x 1,500 hours = $22,500, Contribution Margin

Panera Can Produce and Sell Only One of the Following