In the situation where a firm produces multiple products and has a single resource constraint (e.g., machine hours), the most profitable use of available capacity (machine hours) requires that we assess:
A) The contribution margin per unit of each product.
B) The selling price per unit for each product.
C) Non-production-related costs (e.g., selling costs) associated with each product.
D) The contribution margin of each product per machine hour.
E) The gross profit per unit of each product per machine hour.

Question

Quizplus · Accepted Answer

To determine the most profitable use of available capacity (machine hours) when producing multiple products, we need to determine the contribution margin of each product per machine hour. This calculation will allow us to see which product generates the highest profit for each hour of machine time used.

In the Situation Where a Firm Produces Multiple Products and Has