Answer:
Which product would result in the highest contribution margin - Product Beta
Explanation:
Here is a situation where production is limited by a particular resource - Labor Hours.
To determine which product to manufacture, Sam has to rank the Contribution per unit of the limiting factor - labor of Product Alpha and Product Beta
Contribution per limiting factor are already calculated as:
Product Alpha - $750 per unit of limited resource
Product Beta - $975 per unit of limited resource
The Product with Highest Contribution per limiting factor results in highest contribution margin and must be worked on first
Product Beta should be selected by Sam as it's giving the highest contribution margin per unit of the limited resource - labor.
After deducting the variable part of the firm's costs, the contribution margin indicates the extra money gained for each product/unit sold.
The contribution for each limiting factor has already been computed as follows:
Product Alfa - $ 750 per unit of limited resource
Product beta - $ 975 per unit of limited resource
The product that contributes the most per limiting factor and has the biggest contribution margin should be selected first.
In this case, its Product Beta has the highest contribution per limiting factor that is labor where it is limited by a particular resource single resource that is labor Hours.
Hence, Product Beta should be selected by Sam that results in the highest contribution margin limited by particular resource - labor.
To learn more about contribution margin, refer to the link:
https://brainly.com/question/15684424
