Companies with production constraints and irrelevant fixed costs will be most profitable when they maximize production of the product with the highest
A)sales price.
B)demand for the product.
C)contribution margin per unit of the constraint.
D)contribution margin per unit.

Question

Quizplus · Accepted Answer

In this scenario, production is limited by a constraint, meaning that there is a maximum amount of product that can be produced. Therefore, the best way to maximize profits is to focus on producing the product with the highest contribution margin per unit of the constraint. This will ensure that the limited resources are being used efficiently and that each unit produced generates the most revenue possible. Option A, sales price, is not the best choice because a high sales price does not necessarily translate to higher profits if the production costs are too high. Option B, demand for the product, is also not the best choice because even if there is high demand for a product, if the production is limited by a constraint, producing more of that product may not be feasible. Option D, contribution margin per unit, is not the best choice because it does not take into account the constraint on production.

Companies with Production Constraints and Irrelevant Fixed Costs Will Be