To maximize profits, produce the product with the highest contribution margin per unit of the constraint.

Question

Quizplus · Accepted Answer

This statement is true. Contribution margin is the difference between the selling price and the variable cost per unit. If there is a constraint or limitation on the resources available for production, the best strategy is to focus on producing the product with the highest contribution margin per unit of the constrained resource. This will ensure that each unit of the resource used generates the maximum contribution to cover fixed costs and generate profits.

To Maximize Profits, Produce the Product with the Highest Contribution