Question

Sage Corporation manufactures two products with the following characteristics. Unit Contribution Margin Machine Hours Required for Production Product 1 $44.25 0.15 hours Product 2 $35.50 0.10 hours If Sage’s machine hours are limited to 2,000 per month, determine which product it should produce.

Answer 1

Answer:

It should prioritize Product 2 as his contribution per machine hour is greater.

Explanation:

$\left[\begin{array}{ccc} Concept& Product 1& Product 2\\ CM&44.25&35.5\\ Constrain resource&0.15&0.1\\ CM per MH&295&355\\\end{array}\right]$

We will divide the contribution per unit over the amount of machine hours used to produced.

This will provide us by the contribution per Machine Hour

As Product 2 has a higher contribution per machine hoursi s better to produced with preference over Product 1