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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