Question

Assume Game Company could produce and sell any mix of products A and B at full capacity. If product A takes 2 hours to manufacture and product B takes 1 hour to manufacture and only 120,000 hours of plant capacity are available, it is best for Game Company to produce:_____

Answer 1

Answer:

Product B

Explanation:

The calculation is very simple. If Game Company has 120,000 hours of plant capacity available, and manufacturing one unit of product A takes 2 hours, while manufacturing one unit of product B takes 1 hour, we can see that game company could produce:

Either 120,000 units of product B

or 60,000 units of product A

The only reason why Game Company would produce more units of product A than product B is if the contribution margin of product A was high enough that it compensated the loss in volume with a gain in profit.