A company can sell any mix of Product A and Product B at full capacity. The comp

Question

A company can sell any mix of Product A and Product B at full capacity. The company has? 100,000 hours of capacity. The demand for each product exceeds the capacity. It takes one hour to make one unit of Product A and two hours to make one unit of Product B. The following information is? available:

                                                                                                                                                                                                                                       Product A                                    Product B

Units produced from capacity available             ?100,000                                              ?50,000

Contribution margin per unit                                                                           ?$20                                                                      ?$30

If capacity is the limiting? factor, which product should be? produced?

Explanation / Answer

Contribution margin per hour :

So company should produce product A in 100000 hour .

Product A Product B Contribution margin per unit 30 20 hour per unit 1 2 Contribution margin per hour 30 10

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