Friday, October 26, 2018

Product A has a unit contribution margin of $24. Product B has a unit contribution margin of $30

Product A has a unit contribution margin of $24. Product B has a unit contribution margin of $30. Product A requires four testing hours, while Product B requires six testing hours. Determine the most profitable product, assuming the testing is a constraint.

Answer:


Product A Product B 
Unit contribution margin……………………………………………… $24 $30 
÷ Testing hours per unit………………………………………………     4     6 
Unit contribution margin per production bottleneck hour……… $  6 $  5 
Product A is the most profitable in using bottleneck resources. 

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