A firm's actual throughput and profit depend more on the contribution margin generated at the bottleneck than by the contribution margin of each individual product produced.

Question

Quizplus · Accepted Answer

The bottleneck is the part of the production process that limits the overall capacity of the system. Therefore, the contribution margin generated at the bottleneck determines the maximum amount of profit that the firm can generate. While the contribution margin of each individual product is important, it is the bottleneck that ultimately determines the firm's actual throughput and profit.

A Firm's Actual Throughput and Profit Depend More on the Contribution