When an Organization Faces Multiple Constraints for Multiple Products, What

question 110

Multiple Choice

When an organization faces multiple constraints for multiple products, what kind of quantitative analysis needs to be performed?

• A) Use the same technique as for a special order
• B) No quantitative analysis, because there is no way to use constrained resources optimally
• C) A linear programming analysis that optimizes the contribution margin per constrained resource
• D) Rank products on contribution margin and pick the product with the highest one

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Definitions:

Variable Production Costs

Costs that vary directly with the level of production, such as raw materials and direct labor expenses.

Variable Costing

An accounting method which only includes variable costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Unit Product Cost

The cost assigned to a single unit of a product, incorporating all relevant expenses involved in its production.

Gross Margin

The difference between revenue and cost of goods sold, which indicates how much the company earns from its core business activities before overhead costs.