The Wester Corporation produces three products with the following costs and sell

Question

The Wester Corporation produces three products with the following costs and selling prices: Product A B C Selling price per unit $ 21 $ 12 $ 32 Variable cost per unit $ 11 $ 7 $ 18 Fixed cost per unit 5 3 9 Direct labor hours per unit 0.4 0.1 0.7 Machine hours per unit 0.2 0.5 0.2 The company has insufficient capacity to fulfill all of the demand for these three products. If machine hours are the constraint, then the ranking of the products from the most profitable to the least profitable use of the constrained resource is:

Explanation / Answer

Product A Product B Product C Selling price per unit 21 12 32 Variable cost per unit 11 7 18 Contribution margin per unit 10 5 14 Machine hours per unit 0.2 0.5 0.2 Contribution margin per machine hour 50 10 70 Ranking 2 3 1

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