A company sells two products with information as follows:
$\begin{array}{|l|r|r|}
\hline&{\text { A }} &{\text { B }} \
\hline \text { Price per unit } & \$ 12 & \$ 10 \
\hline \text { Variable cost per unit } & \$ 4 & \$ 1 \
\hline
\end{array}$ Products are made by machine. 4 units of product A can be made with 2 machine hour and 2 units of product B can be made with 0.50 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:
 $\begin{array}{|l|r|r|} 
\hline&{\text { A }} &{\text { B }} \
\hline \text { Price per unit } & \$ 12 & \$ 10 \
\hline \text { Variable cost per unit } & \$ 4 & \$ 1 \
\hline
\end{array}$ Products are made by machine. 4 units of product A can be made with 2 machine hour and 2 units of product B can be made with 0.50 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