Question

Waleksa Whiskey has a limited amount of vat capacity available in which it can distill whiskey. In deciding which whiskey to distill, Waleska Whiskey's management should consider:

A. The contribution margins of the individual whiskeys.
B. The unit contribution margins of the individual whiskeys.
C. The contribution margin ratios of the individual whiskeys.
D. The contribution margin per unit of vat capacity of the individual whiskeys.

Answer 1

Waleksa Whiskey's management should prioritize the contribution margin per unit of vat capacity when selecting whiskeys to distill due to vat capacity constraints, focusing on both efficiency and profitability.

Step-by-step explanation:

The management at Waleksa Whiskey when deciding which whiskey to distill given their limited vat capacity should consider the contribution margin per unit of vat capacity of the individual whiskeys. This measure will take into account both the efficiency with which the whiskey uses the vat capacity and the profitability of each whiskey. Simply looking at the total or unit contribution margins does not account for the constraints of vat capacity and could lead to suboptimal decisions.