Question

If a company has the capacity to produce either 10,000 units of Product X or 10,000 units of Product Y, and the markets for both products are unlimited, the company should commit 100% of its capacity to the product that has the higher contribution margin per unit of a limiting resource.

a. True
b. False

Answer 1

a. True

Step-by-step explanation:

As we know that the profits of the company is depend upon the contribution

Also

we know that

Profits = Contribution - Fixed Costs

So it is very clear that for both the products the fixed cost is constant also the other factors is similar. If there is a high contribution margin so it would become more profitable as it produced high profits

Therefore the given statement is true