Companies with production constraints and irrelevant fixed costs will be most profitable when they maximize production of the product with the highest

Question

Quizplus · Accepted Answer

Companies with production constraints, such as limited labor or materials, should prioritize producing the product with the highest contribution margin per unit of the constraint. This ensures that they are making the most profit on the limited resources they have. The contribution margin per unit (option C) is also a relevant factor, but it does not take into account the constraints on production. Sales price (option A) and demand (option B) are important factors, but they do not necessarily guarantee high profit margins if the production constraints are not considered.

Companies with Production Constraints and Irrelevant Fixed Costs Will Be