A company sells two products with information as follows:
$$\begin{array} { | l | r | r | }
\hline & \text { A } & \text { B } \
\hline \text { Sales price per unit } & \$ 15 & \$ 21 \
\hline \text { Variable cost per unit } & \$ 4 & \$ 13 \
\hline
\end{array}$$ Products are made by machine.Four units of product A can be made with three machine hours and five units of product B can be made with 0.7 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:
 $$\begin{array} { | l | r | r | } 
\hline & \text { A } & \text { B } \
\hline \text { Sales price per unit } & \$ 15 & \$ 21 \
\hline \text { Variable cost per unit } & \$ 4 & \$ 13 \
\hline
\end{array}$$ Products are made by machine.Four units of product A can be made with three machine hours and five units of product B can be made with 0.7 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

The contribution margin per machine hour is higher for product B. Product A has a contribution margin of $11 per unit, and product B has a contribution margin of $8 per unit. However, product B requires less machine time per unit, making it more efficient in terms of machine hours.

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