Question

For a multi-product company with a limited resource, company-wide net income will be maximized if A : fixed costs equal the dollar amount of sales. B : production capacity is prioritized to the product with the highest contribution margin per unit of limited resource. C : total costs equals sales revenue. D : production capacity is prioritized to the product with the highest unit contribution margin.

Answer 1

D : production capacity is prioritized to the product with the highest unit contribution margin.

Step-by-step explanation:

The poduct with the highest unit contribution margin is key to calculate the Gross Profit Margin .

"Gross profit margin analyzes the relationship between gross sales revenue and the direct costs of sales. This comparison forms the first section of the income statement. Companies will have varying types of direct costs depending on their business. Companies that are involved in the production and manufacturing of goods will use the cost of goods sold measure while service companies may have a more generalized notation.

Overall, the gross profit margin seeks to identify how efficiently a company is producing its product. The calculation for gross profit margin is gross profit divided by total revenue. In general, it is better to have a higher gross profit margin number as it represents the total gross profit per dollar of revenue. "

Reference: Beers, Brian. “Gross, Operating, and Net Profit Margin: What's the Difference?” Investopedia, Investopedia, 14 Sept. 2019