Question

A company can sell any mix of Product A and Product B at full capacity. The company has 100,000 hours of capacity. The demand for each product exceeds the capacity. It takes one hour to make one unit of Product A and two hours to make one unit of Product B. The following information is available:

Product A Product B
Units produced from capacity available 100,000 50,000
Contribution margin per unit $20 $30

If capacity is the limiting factor, which product should be produced?

Answer 1

Answer:

Company A produce 100,000.

Explanation:

As per the given question, the computation is given below:-

                                                      Product A      Product B

Per unit Contribution margin        $20                 $30

Hours per unit                                1                       2

Per hour Contribution margin       20                    15

Therefore Company A produces 100,000.