Question

A paint manufacturing company produces three paint bases of differing quality. Due to throughput limitations (measured in gallons) at their facility, they are unable to meet total demand for their products. In determining which of their products they should produce, what should they consider?

a. The gross profit per unit for each product
b. The operating margin per unit for each product
c. The contribution margin per gallon of throughput for each product
d. None of the above

Answer 1

c. The contribution margin per gallon of throughput for each product

Step-by-step explanation:

contribution margin per gallon = Revenue per gallon - variable cost per gallon.

Contribution margin would enable the company to know the amount each product earns in excess after variable cost has been subtracted from revenue.

the product with the highest contribution margin should be considered.