When there is a production constraint, the company should first produce the product with:
A)The highest contribution margin per unit
B)The highest contribution margin ratio
C)The highest revenue per unit
D)The highest contribution margin per unit of the constrained resource

Question

Quizplus · Accepted Answer

When there is a production constraint, the company should produce the product with the highest contribution margin per unit of the constrained resource, as this will provide the highest overall profit contribution given the limited availability of the resource. The contribution margin ratio and revenue per unit are important factors to consider, but they do not necessarily take into account the impact of the production constraint on profitability. Therefore, option D is the best choice in this scenario.

When There Is a Production Constraint, the Company Should First