When Multiple Products Share a Constrained Resource, the Way to Allocate

question 164

Multiple Choice

When multiple products share a constrained resource, the way to allocate the resource is to compute the

• A)contribution per unit.
• B)contribution margin per constrained resource.
• C)opportunity cost per unit.
• D)profit per unit.

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Definitions:

Target Capital Structure

The mix of debt, equity, and other financing sources a company aims to use to finance its operations and growth.

WACC

Weighted Average Cost of Capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets.

Cost of Equity

Cost of equity is the return a company requires to decide if an investment meets capital return requirements and can be seen as the return on equity that shareholders expect for their investment risk.

Flotation Cost

The total costs incurred by a company in issuing new securities, including underwriting, legal, registration, and other expenses.