Final answer:
When there is a production constraint, a company should emphasize products with the highest CM per unit of the constrained resource. The CM per unit of the constrained resource measures the amount of profit generated by each unit of the constrained resource used in the production process.
Step-by-step explanation:
When there is a production constraint, a company should emphasize products with the highest CM per unit of the constrained resource. The CM (Contribution Margin) per unit of the constrained resource measures the amount of profit generated by each unit of the constrained resource used in the production process. For example, if the constrained resource is labor, the company should prioritize products that generate the highest CM per unit of labor employed. This ensures that the limited labor resources are utilized efficiently to maximize profits.
This is because the goal is to maximize the contribution margin (CM) from the limited resources. By focusing on products with the highest contribution margin per unit of the constrained resource, the company can make the most efficient use of its limited capacity and generate the highest overall contribution margin.