Reetz Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions.For illustration, the company has provided the following data for product A25H: What is the profitability index for product A25H?
A)$47, 560
B)$29.00 per gram
C)$5.80 per gram
D)0.20

Question

Reetz Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions.For illustration, the company has provided the following data for product A25H:  What is the profitability index for product A25H?
A)$47, 560 
B)$29.00 per gram 
C)$5.80 per gram 
D)0.20

Quizplus · Accepted Answer

Profitability index for a volume trade-off decision = Unit contribution margin ÷ Amount of the constrained resource required by one unit = ($58.00 - $46.40)÷ 2 grams = $11.60 ÷ 2 grams = $5.80 per gram

Reetz Corporation Would Like to Determine the Relative Profitability of the Company's