Morgan Inc If Market Demand Exceeds the Available Capacity, in What Sequence

question 24

Multiple Choice

Morgan Inc. has 5,400 machine hours available each month. The following information on the company's three products is available:
$$\begin{array} { l r r r } & \text { Product 1 } & \text { Product 2 } & \text { Product 3 } \\\text { Contribution margin per unit } & \$ 15.00 & \$ 1 8 . 00 & \$ 7 . 5 0\\\text { Machine hours per unit } & 3 & 2 & 1\end{array}$$
If market demand exceeds the available capacity, in what sequence should orders be filled to maximize the company's profits?

• A) Product 1 first, product 2 second, and product 3 third.
• B) Product 2 first, product 3 second, and product 1 third.
• C) Product 3 first, product 2 second, and product 1 third.
• D) Product 3 first, product 1 second, and product 2 third.

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Definitions:

Dividends

Payments made by a corporation to its shareholders from its profits or reserves, usually in the form of cash or additional shares.

Recognized Gain

An increase in the value of an asset that has been sold or deemed to have increased in value officially on financial statements.

Selling Price

The amount for which a product or service is sold, not necessarily equal to the cost or intrinsic value of the item.

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as the original cost minus depreciation or amortization.