Respuesta :
To maximize the profit, management should rank products based on their contribution margin per unit of the constrained resource that is option D is correct.
The contribution margin per unit of the constrained resource will enable the company to rank the products in descending order of importance and the company will focus on producing those products that are demanded by the consumers. This will be done by utilizing the resources of the company to the fullest capacity in order to manufacture the goods according to consumer demands. The other factors vis Gross margin, Contribution margin and Selling price will not be able to help the company as Gross margin is used when all the products are formed from same raw materials but in this case different raw materials are used for different products. The Contribution margin determines the contribution of each unit in company's profit and selling price varies for different products.
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Complete Question:
United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their:
A) gross margin
B) contribution margin
C) selling price
D) contribution margin per unit of the constrained resource
