A Company Can Sell All the Units It Can Produce

question 36

Multiple Choice

A company can sell all the units it can produce of either Product A or Product B but not both.Product A has a unit contribution margin of $16 and takes two machine hours to make and Product B has a unit contribution margin of $30 and takes three machine hours to make.If there are 5,000 machine hours available to manufacture a product, income will be

• A)$10,000 more if Product A is made.
• B)$10,000 less if Product B is made.
• C)$10,000 less if Product A is made.
• D)the same if either product is made.

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Definitions:

Agency Problem

A conflict of interest arising between principals, such as shareholders, and agents, such as company executives, due to differing goals.

Study of Finance

The discipline that concerns the management, creation, and study of money, banking, credit, investments, assets, and liabilities.

Real Assets

Physical or tangible assets that have intrinsic value, such as real estate, commodities, and natural resources.

Financial Assets

Assets that derive value from a contractual claim, such as bank deposits, bonds, and stocks.