1. Variable cost is frequently used as a proxy for

Multiple Choice

• contribution margin.

• avoidable cost.

• opportunity cost.

• constraining cost.

2. All other things being equal, a company should promote the sale of products with higher contribution margins. This statement is

Multiple Choice

• true.

• false.

3.The theory of constraints focuses on the identification and expansion of bottlenecks that constrain profitability. This statement is

Multiple Choice

• true.

• false.

4. Clairnex Company produces two products with selling price and variable cost per unit as follows:

	Product A				Product B
Selling price per unit	$	50			$	70
Variable cost per unit		30				40

Due to labor constraints, demand for the products is greater than supply. Product A requires 2 hours of labor to produce and Product B requires 5 hours of labor to produce. Based on this information Clairnex should focus its efforts on selling

Multiple Choice

• Product B because it has a greater contribution margin.

• Product A because it has a lower variable cost per unit.

• Product B because it has a lower contribution margin per labor hour.

• Product A because it has a greater contribution margin per labor hour.

5.

Clairnex Company produces two products with selling price and variable cost per unit as follows:

	Product A				Product B
Selling price per unit	$	50			$	70
Variable cost per unit		30				40

Due to labor constraints, demand for the products is greater than supply. Product A requires 2 hours of labor to produce and Product B requires 5 hours of labor to produce. Based on this information Clairnex should hire additional labor if the labor rate for product A is

Multiple Choice

• $19 per hour.

• $29 per hour.

• $9 per hour.

• None of the answers is correct.