Constrained Resources. Creative, Inc., produces three types of products: basic, standard, and deluxe. The products are produced in separate departments and sent to the quality testing department before being packaged and shipped. A labor-hour bottleneck has been identified in the quality testing department due to the high skill requirements of the job. Creative, Inc., would like to optimize its use of labor hours by producing the two most profitable products. Information for each product follows. 

                                             Production machine-hours                   Price                       Variable cost

Basic                                                  1.25                                          $1,000                         $400

standard                                            1.00                                            500                              300

Deluxe                                                1.00                                            800                             450 

Required: 

 a. Calculate the contribution margin per unit of constrained resource for each product

 b. Which two products would Creative, Inc., prefer to produce and sell to optimize the use of labor hours in the quality testing department?

Answer rating: 100% (QA)

Ans a Contribution margin Price Variable cost 1 Contribution margin per unit pr... View the full answer