What Should a Firm Faced with a Production Constraint Do

question 93

Multiple Choice

What should a firm faced with a production constraint do to maximize total contribution margin?

• A) Promote those products having the highest unit contribution margins.
• B) Promote those products having the highest contribution margin ratios.
• C) Promote those products having the highest contribution margin per unit of constrained resource.
• D) Promote those products having the highest contribution margins and contribution margin ratios.

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Definitions:

Income Summary

An account used in the closing process that summarizes all income and expenses for the period, leading to the net profit or loss.

Reversing Entry

An accounting entry that is made at the beginning of a period to negate or cancel out the effects of an adjusting entry made at the end of the previous period.

Common Stock

Holding shares in a corporation that come with privileges to make decisions through voting and to earn dividends from the company's earnings.

Current Assets

Properties that an organization foresees turning into cash, selling, or expending over the course of a year or its operating cycle, whichever timeframe is more extended.