To maximize profit when capacity is in short supply, minimize the contribution margin per unit of capacity.

Question

Quizplus · Accepted Answer

When capacity is in short supply, it is important to make the most of the available resources. To maximize profit, the company should focus on products or services with the highest contribution margin per unit of limited resource. This ensures that every unit of limited resource is utilized to generate maximum profit. Therefore, the company should maximize contribution margin per unit of limited resource, not minimize it.

To Maximize Profit When Capacity Is in Short Supply, Minimize