Question

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: a. selling price per unit. b. contribution margin per unit. c. contribution margin per unit of the constraining resource. d. unit sales volume.

Answer 1

c. contribution margin per unit of the constraining resource.

Step-by-step explanation:

Whenever there is production of multi-products in the same plant, with the same resources, there arises a constraint, in number of resources available.

Therefore, for this the contribution per unit of that constraint resource shall be computed.

As that particular resource is in constraint, the contribution for such particular resource shall be computed in order to have maximum contribution.

In that case, the correct option is:

c. contribution margin per unit of the constraining resource.