Morris Inc.manufactures two products: Widgets and Gizmos.Widgets have a contribution margin per unit of $30 and require 2 hours of direct labour while Gizmos have a contribution margin per unit of $39 and require 3 hours of direct labour.
A. In the short-run, how should the company choose which product to produce or sell first if direct labour hours are a constraint?
B. Assuming there is sufficient demand for each of these products, which of the above products should the company maximise production of first? Show calculations to support your answer.

Question

Quizplus · Accepted Answer

The Answer of Morris Inc.manufactures two products: Widgets and Gizmos.Widgets have a contribution margin per unit of $30 and require 2 hours of direct labour while Gizmos have a contribution margin per unit of $39 and require 3 hours of direct labour.
A. In the short-run, how should the company choose which product to produce or sell first if direct labour hours are a constraint?
B. Assuming there is sufficient demand for each of these products, which of the above products should the company maximise production of first? Show calculations to support your answer.