The General Rule to Apply to Maximize Profit When Capacity

question 10

Short Answer

The general rule to apply to maximize profit when capacity is in short supply is: a. Minimize the contribution margin per unit of capacity.
B) Maximize the margin of safety per unit of capacity.
C) Maximize the contribution margin per unit of capacity.
D) Minimize the margin of safety per unit of capacity.
E) Maximize the unit contribution margin.

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Definitions:

Cash Basis

An accounting method that recognizes revenues and expenses only when cash is exchanged.

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid, regardless of when the transactions occurred.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor used in creating the good.

Direct Method

A cash flow statement presentation method that shows actual cash inflows and outflows from operating activities, as opposed to the indirect method which starts with net income and adjusts for non-cash transactions.