Products Uno, Dos, Tres, and Quatro have contribution margins of $2, $3, $4, and $5, respectively, and require 1.5, 2, 2.5, and 3 machine hours per unit, respectively. Assuming that all units produced could be sold and that total machine hours per month are limited, on which product should the company concentrate its efforts?
A) Dos
B) Quatro
C) Uno
D) Tres

Question

Quizplus · Accepted Answer

To determine which product the company should concentrate on we need to calculate the contribution margin per machine hour for each product:

- Uno: $2 / 1.5 = $1.33
- Dos: $3 / 2 = $1.5
- Tres: $4 / 2.5 = $1.6
- Quatro: $5 / 3 = $1.67

Based on these calculations, Quatro has the highest contribution margin per machine hour and therefore the company should concentrate its efforts on producing Quatro.

Products Uno, Dos, Tres, and Quatro Have Contribution Margins of $2