Companies with Production Constraints and Irrelevant Fixed Costs Will Be

question 56

Multiple Choice

Companies with production constraints and irrelevant fixed costs will be most profitable when they maximize production of the product with the highest:

• A)sales price.
• B)demand for the product.
• C)contribution margin per unit.
• D)contribution margin per unit of the constraint.

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Definitions:

Job-Order Costing

A cost accounting method by which costs are assigned to specific jobs or batches, making it possible to calculate the cost per job accurately.

Direct Labor

The labor cost of workers who are directly involved in the production or manufacture of goods or services.

Work in Process

Partially finished goods that are still in the process of production. They are considered an asset on the company's balance sheet.

Manufacturing Overhead

All indirect costs related to the production process, including utilities, depreciation on equipment, and factory maintenance, not directly tied to specific units of output.