Question

In a manufacturing setting, "the best short-term profit maximization approach is to maximize contribution unit times...

In a manufacturing setting, "the best short-term profit maximization approach is to maximize contribution unit times the number of units sold." Discuss the truthfulness of the statement and show by way of examples how you would set about demonstrating the accuracy of such a statement.

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Answer #1

Answer:-

The statement is TRUE.

Explanation :-

■The best short term profit maximization approach.

●The better way to predict profit is by using the marginal costing approach.

● In thisapproach, profit is determined as contribution margin less fixed costs andexpenses.

●This means that a peso increase in contribution margin is a pesoincrease in profit.

●Considering that fixed costs are constant, to maximize profitmeans maximizing contribution margin per total and per unit.

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