Before answering which product is more profitable let's first summarize the details given in question Particulars West 1 West 2 Amount in $ Unit Selling Price 13 31 Less: Variable Expenses Direct Material 7 5 Direct labour 1 6 Variable Overhead 1.25 7.5 variable Selling and administrative costs 0.75 0.5 Unit Contribution 3 12 Now as labour is scarce thus we need to find contribution per labour hour for finding contribution per labour hour we need to find out number of hours labour contribute to per unit of West 1 & west 2 1 : Calculation of Number of hours per unit Particulars West 1 West 2 Wage rate for 1 hour $21 $21 $ Wages for 1 Unit 1 6 Number of Hours for 1 Unit(Wage rate for 1 Unit/Wage rate for 1 Hour) 0.05 0.29 Calculation of contribution per hours = Unit Contribution/ number of hours per unit Particulars West 1 West 2 Unit Contribution 3 12 Number of Hours for 1 Unit 0.05 0.291 Contribution per hour 631 42 When resource is scarce and key factor decision is based upon contribution per key factor as in this case West 1 Contribution per labour hour is high.Hence manufacturing West 1 is more Profitable Before answering which product is more profitable let's first summarize the details given in question Particulars West 1 West 2 Amount in $ Unit Selling Price 13 31 Less: Variable Expenses Direct Material 7 5 Direct labour 1 6 Variable Overhead 1.25 7.5 variable Selling and administrative costs 0.75 0.5 Unit Contribution 3 12 Now as labour is scarce thus we need to find contribution per labour hour for finding contribution per labour hour we need to find out number of hours labour contribute to per unit of West 1 & west 2 1 : Calculation of Number of hours per unit Particulars West 1 West 2 Wage rate for 1 hour $21 $21 $ Wages for 1 Unit 1 6 Number of Hours for 1 Unit(Wage rate for 1 Unit/Wage rate for 1 Hour) 0.05 0.29 Calculation of contribution per hours = Unit Contribution/ number of hours per unit Particulars West 1 West 2 Unit Contribution 3 12 Number of Hours for 1 Unit 0.05 0.291 Contribution per hour 631 42 When resource is scarce and key factor decision is based upon contribution per key factor as in this case West 1 Contribution per labour hour is high.Hence manufacturing West 1 is more Profitable