Morgan Inc has 5,400 machine hours available each month. The following information on the company's three products is available:
| Product 1 | Product 2 | Product 3 | |||||||||
| Contribution margin per unit | $ | 15.00 | $ | 18.00 | $ | 7.50 | |||||
| Machine hours per unit | 3 | 2 | 1 | ||||||||
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If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits? a. Product 3 first, product 2 second, and product 1 third. b. Product 2 first, product 3 second, and product 1 third. c. Product 3 first, product 1 second, and product 2 third. d. Product 1 first, product 2 second, and product 3 third. |
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Answer:- If market demand exceeds the available capacity, the sequence of orders should be filled to maximize the company's profits are as follows:-
Product 2 first, product 3 second, and product 1 third.
Explanation:-
| Morgan Inc. | |||
| Statement of Ranking | |||
| Products | Product 1 | Product 2 | Product 3 |
| $ | $ | $ | |
| Contribution Margin per unit | 15 | 18 | 7.5 |
| Machine hours per unit | 3 | 2 | 1 |
| Contribution per minute of the constrained resource | 5 | 9 | 7.5 |
| Ranking | 3 | 1 | 2 |
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