The Resource That Restricts or Limits the Production or Sale

question 8

Multiple Choice

The resource that restricts or limits the production or sale of products is:

• A)never machine hours.
• B)the average contribution margin per unit of constraint.
• C)the lowest contribution margin per unit of constraint.
• D)the highest contribution margin per unit of constraint.
• E)the product that achieves additional capacity in the short-run.

---

Definitions:

Variable Costing

A costing method that only includes variable costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, while fixed costs are expensed in the period they are incurred.

Absorption Costing

An accounting method that includes both variable and fixed manufacturing overhead costs in the cost of a unit of product.

Manufacturing Overhead

All indirect costs related to manufacturing, excluding direct materials and direct labor, such as factory rent, utilities, and equipment depreciation.

Absorption Costing

A method for determining the cost of a product by including all manufacturing expenses, like material costs, labor fees, and both changeable and stationary overheads.