If a company has the capacity to produce either 10,000 units of Product X or 10,000 units of Product Y,and the markets for both products are unlimited,the company should commit 100% of its capacity to the product that has the higher contribution margin.

Question

Quizplus · Accepted Answer

By committing 100% of its capacity to the product with the higher contribution margin, the company can maximize its profits. This strategy ensures that the company produces more units of the product with higher profitability, rather than manufacturing the same number of less profitable units of both products.

If a Company Has the Capacity to Produce Either 10,000