Question

Sophamia Company sells five products, as follows. Product A: Price per unit, $100 -- Variable cost per unit, $40 -- 3 machine hours required Product B: Price per unit, $80 -- Variable cost per unit, $10 -- 2 machine hours required Product C: Price per unit, $120 -- Variable cost per unit, $30 -- 5 machine hours required Product D: Price per unit, $90 -- Variable cost per unit, $60 -- 1 machine hour required Product E: Price per unit, $150 -- Variable cost per unit, $110 -- 4 machine hours required Because of a delay in the delivery of new production machines, during the current year the scarce resource in Sophamia Company is MACHINE HOURS. Which product should the company emphasize in its marketing campaign

Answer 1

Answer: Product B

Step-by-step explanation:

The product to be emphasized is the one that has the highest contribution margin per machine hour.

A B C D E

Price 100 80 120 90 150

Variable Cost (40) (10) (30) (60) (110)

Contribution Margin per unit 60 70 90 30 40

Machine hours requirement 3 2 5 1 4

Contribution margin per machine hour 20 35 18 30 10

According to the Contribution Margin per machine hour, Product B should be emphasized as it gives the higher margin per unit.

This answer is based on the figures you gave so do crosscheck the figures given as there can be multiple variants of this question.