A company sells two products with information as follows:
$$\begin{array} { | l | r | r | }
\hline & \text { A } & \text { B } \
\hline \text { Sales price per unit } & \$ 22 & \$ 20 \
\hline \text { Variable cost per unit } & \$ 8 & \$ 17 \
\hline
\end{array}$$ Products are made by machine. Five units of product A can be made with five machine hours and four units of product B can be made with 0.6 machine hour. If there are no constraints on production or sales of either product, then the company should emphasize sales of product B.

Question

A company sells two products with information as follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { A } & \text { B } \
\hline \text { Sales price per unit } & \$ 22 & \$ 20 \
\hline \text { Variable cost per unit } & \$ 8 & \$ 17 \
\hline
\end{array}$$ Products are made by machine. Five units of product A can be made with five machine hours and four units of product B can be made with 0.6 machine hour. If there are no constraints on production or sales of either product, then the company should emphasize sales of product B.

Quizplus · Accepted Answer

Product B has a higher contribution margin per machine hour than product A.

A Company Sells Two Products with Information as Follows Products Are Made by Machine