A company makes four products.If it sells everything it produces and is only constrained by finding enough skilled labor,then its goal should be to maximize the contribution margin per labor-hour.

Question

Quizplus · Accepted Answer

Contribution margin is the difference between the selling price and the variable cost per unit, and it indicates how much each unit sold contributes to covering fixed costs and generating profits. Labor-hour is one of the major factors affecting variable costs, and it is a limited resource for the company. Therefore, if the company wants to maximize its profits, it should focus on producing the products that generate the highest contribution margin per labor-hour to make the most of its scarce resources.

A Company Makes Four Products