Morgan Inc Has 5,400 Machine Hours Available Each Month If Market Demand Exceeds the Available Capacity,in What Sequence Should

question 116

Multiple Choice

Morgan Inc has 5,400 machine hours available each month.The following information on the company's three products is available:
$$\begin{array} { | l | r | r | r | } \hline & \text { Product } & \text { Product } & \text { Product } \\& 1 & 2 & \mathbf { 3 } \\\hline \text { Contribution margin per } & \$ 15.00 & \$ 18.00 & \$ 7.50 \\\text { unit } & & & \\\hline \text { Machine hours per unit } & 3 & 2 & 1 \\\hline\end{array}$$
If market demand exceeds the available capacity,in what sequence should orders be filled to maximize the company's profits?

• A) Product 1 first,product 2 second,and product 3 third.
• B) Product 2 first,product 3 second,and product 1 third.
• C) Product 3 first,product 2 second,and product 1 third.
• D) Product 3 first,product 1 second,and product 2 thirD.
• P1 CM/hr = 15/3 = $5;P2: 18/2 = $9;P3: 7.50/1 = $7.50

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Definitions:

Mutually Exclusive

A condition in which two or more propositions cannot both be true at the same time, often applied in scenarios of project selection or decision making.

IRR

Internal Rate of Return, a financial metric used to assess the profitability of investments by calculating the interest rate that makes the net present value of all cash flows equal to zero.

Decision Rules

Guidelines or criteria used to make choices among alternatives in decision-making processes.

Cost of Capital

Cost of capital refers to the minimum rate of return that a company must earn on its investments to maintain its market value and satisfy its stakeholders.