If a Company Has the Capacity to Produce Either 10,000

question 147

True/False

If a company has the capacity to produce either 10,000 units of Product A or 10,000 units of Product B; assuming fixed costs are the same,production restrictions are the same for both products,and the markets for both products are unlimited; the company should commit 100% of its capacity to the product that has the higher contribution margin per unit of operating capacity.

---

Definitions:

Materials Cost

The expense incurred by a company for the raw materials used in the production of its goods.

Weighted-Average Method

An inventory valuation method that calculates the cost of goods sold and ending inventory based on the average cost of all items.

Ending Work

The work or tasks that are in the process of being completed at the end of a given period, often used in the context of project management or production.

Cost System

A method utilized by companies to measure, record, and analyze costs associated with their operations.