Figures for Lakes Company Are It Requires One Labour Hour to Produce One Unit of }

question 44

Multiple Choice

Figures for Lakes Company are: $$\begin{array} { l r r } & \text { Product A } & \text { Product B } \\\text { Selling price per unit } & \$ 44 & \$ 52 \\\text { Variable cost per unit } & \underline { 36 } & \underline { 28 } \\\text { Contribution margin } & \$ \underline { 8 } & \$ \underline { 24 }\end{array}$$ It requires one labour hour to produce one unit of Product A and four labour hours to produce one unit of Product B.Assume overall demand is greater than the company's capacity to produce.If labour is the constraining factor the company should concentrate production on:

• A)Product B,since it has the highest contribution margin per unit
• B)Product B,since it has the highest price
• C)Product A,since it has the highest contribution margin per labour hour
• D)Product B,since it has the lowest costs

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