When resources are constrained, managers should emphasise the product with the
A) Highest contribution margin per unit
B) Highest contribution margin per unit of constrained resource
C) Lowest average cost
D) Largest market share

Question

Quizplus · Accepted Answer

When resources are constrained, managers should emphasize the product with the highest contribution margin per unit of constrained resource. This helps to maximize profitability and make the most efficient use of the limited resources available. Choosing the product with the highest contribution margin per unit alone (option A) may not be effective if the product requires more of the constrained resource than another product with a slightly lower contribution margin. Choosing the product with the lowest average cost (option C) does not necessarily take into account the potential revenue generated by each product. Finally, choosing the product with the largest market share (option D) may not be the most profitable choice if the product requires a significant amount of the constrained resource.

When Resources Are Constrained, Managers Should Emphasise the Product with the