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:

Demand

A relation between the price of a good and the quantity that consumers are willing and able to buy per period, other things constant.

Willing and Able

The readiness and capability of individuals or groups to engage in a particular activity.

Buyers

Individuals or entities that purchase goods or services for personal use, resale, or production.

Income Effect

The variation in the income of a person or an economy and its impact on the demand for products or services.