Product A requires 5 machine hours per unit to be produced,Product B requires only 3 machine hours per unit,and the company's productive capacity is limited to 240,000 machine hours.Product A sells for $16 per unit and has variable costs of $6 per unit.Product B sells for $12 per unit and has variable costs of $5 per unit.Assuming the company can sell as many units of either product it produces,the company should:
A)Produce only Product A.
B)Produce only Product B.
C)Produce equal amounts of A and B.
D)Produce A and B in the ratio of 62.5% A to 37.5% B.
E)Produce A and B in the ratio of 40% A and 60% B.

Question

Quizplus · Accepted Answer

Product B has a higher contribution margin per machine hour ($2.33) compared to Product A ($2), making it more profitable to produce only Product B given the machine hour constraint.

Product a Requires 5 Machine Hours Per Unit to Be