Table 7.5 A Company Makes Four Products That Have the Following Characteristics

question 135

Multiple Choice

Table 7.5
A company makes four products that have the following characteristics: Product A sells for $50 but needs $10 of materials and $15 of labor to produce;Product B sells for $75 but needs $30 of materials and $15 of labor to produce;Product C sells for $100 but needs $50 of materials and $30 of labor to produce;Product D sells for $150 but needs $75 of materials and $40 of labor to produce.The processing requirements for each product on each of the four machines are shown in the table. Work centers W,X,Y,and Z are available for 40 hours per week and have no setup time when switching between products.Market demand for each product is 80 units per week.In the questions that follow,the traditional method refers to maximizing the contribution margin per unit for each product,and the bottleneck method refers to maximizing the contribution margin per minute at the bottleneck for each product.
-Use the information in Table 7.5.Using the bottleneck method,which product should be scheduled first?

• A)Product A
• B)Product B
• C)Product C
• D)Product D

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture due to financial market fluctuations, interest rate changes, or bad management decisions.

Capital Structure

The blend of borrowed money and shareholder capital a corporation employs to support its operational and developmental needs.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, amplifying both the potential gains and losses.

Unlevered Cost

The cost of investment or project financing without taking into account the impact of leveraging or borrowing.