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When a company sells a mix of products, and its production facilities are operating at or near capacity, management looks for the most profitable sales mix of products. The contribution margin per unit of constrained resource is used to find the best sales mix.

Knowledge Check $01$

Hamrick Industries makes and sells two products. The demand for both products is unlimited. Product A has a contribution margin of $$7\mathrm{.}70$ per unit. Product B has a contribution margin of $$2\mathrm{.}64$ per unit. The same machines are used to produce both products. Product A requires $0\mathrm{.}33$ machine hours and product B requires $0\mathrm{.}20$ machine hours. Which product should the company make and sell?

multiple choice

Product A because the selling price is $$11\mathrm{.}00$ per unit.

Product A because the contribution margin per unit is $$7\mathrm{.}70.$

Product A because the contribution margin per MH is $$23\mathrm{.}33.$

Product B because the contribution margin per MH is $$13\mathrm{.}20.$

Product B because the contribution margin per unit is $$2\mathrm{.}64$