Question

Ptarmigan Company produces two products. Product A has a contribution margin of $85.80 and requires 11 machine hours. Product B has a contribution margin of $107.80 and requires 14 machine hours. Determine the most profitable product assuming the machine hours are the constraint.

Answer 1

Answer:

Product A $7.80

Explanation:

Calculation to Determine the most profitable product assuming the machine hours are the constraint.

PRODUCT A PRODUCT B

Contribution margin per unit $85.80 $107.80

÷Machine hours 11 14

=Contribution margin per bottle neck hour

$7.80 $7.70

Based on the above calculation Product A is the most profitable because product A profit Amount of $7.80 is higher than that of product B.