When constrained by a limiting resource, managers often seek to produce those products which have:
A) The highest selling prices.
B) The lowest average cost per unit.
C) The highest contribution margin per unit of limiting resource.
D) The highest contribution margin ratios.

Question

Quizplus · Accepted Answer

When constrained by a limiting resource, managers need to optimize the use of that resource. This means producing products that provide the highest contribution margin per unit of the limiting resource. By doing so, the company can maximize its profits while efficiently utilizing its resources. Choosing the highest selling prices or lowest average cost per unit may not necessarily lead to maximum profitability when a resource is constrained. Similarly, the highest contribution margin ratios may not reflect the optimal use of the limiting resource.

When Constrained by a Limiting Resource, Managers Often Seek to Produce