Question

QUESTION 6 Courtney Company has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: Product Unit Price Unit Variable Costs Units Made Per Hour L $400 $200 10 M $300 $150 25 N $600 $250 10 O $200 $100 16 Which product should be emphasized first? A. L B. N C. O D. M

Answer 1

Here, time is a limited factor, so let us first find out the contribution margin per hour of all the products
	L	M	N	O
Contribution margin per unit [ Unit price - Unit variable cost ]	200	150	350	100
(*) Units made per hour	10	25	10	16
Contribution margin per hour	2000	3750	3500	1600
As the contribution margin per hour of product M is higher than the other 3 products, Product M should be emphasized first
Answer : Option D [ M ]