Figures for Clear Waters Company Are It Requires One Labour Hour to Produce One Unit of c

question 5

Multiple Choice

Figures for Clear Waters Company are:
$$\begin{array} { l c c } & \text { Product A } & \text { Product B } \\\text { Selling price per unit } & \$ 132 & \$ 156 \\\text { Variable cost per unit } & \underline { 108 } & \underline { \$ 4 } \\\text { Contribution margin } & \underline { \$ 24 } & \$ \underline { 72 }\end{array}$$
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 lowest variable costs.
• B) Product B, since it has the highest selling price.
• C) Product B, since it has the highest contribution margin per unit.
• D) Product A, since it has the highest contribution margin per labour hour.

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