A Company Has Three Products Possible Products That It Can

question 17

Multiple Choice

A company has three products possible products that it can produce in a machine intensive production process. Capacity is constrained by the number of hours the machines can run during a period and the products are so popular that all units produced will be sold. Here is additional information:

Which of the following would be an accurate conclusion based on these facts?

• A) A balanced mix of 1/3 A, 1/3 B, and 1/3 C should be the goal when maximizing operating income in the short-run.
• B) Since Product C has the greatest contribution margin per unit and therefore emphasizing its production and sales will lead to the highest operating income in the short-run
• C) Since A takes less time to produce, maximization of operating income will occur by emphasizing production and sales of A.
• D) Product B should be emphasized if the goal is to maximize contribution margin.

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Definitions:

Economic Question

Fundamental questions that address the allocation of resources and the distribution of goods and services in an economy.

Pure Capitalism

An economic system purely driven by market forces with minimal governmental intervention, where private individuals and firms control the production and distribution of goods.

Central Planning

An economic system where key decisions about production, distribution, and consumption of goods and services are made by the government or a central authority.

Shift Inward

A situation in economics where the supply curve moves towards the origin, indicating a decrease in supply at every price level.