Answered: “Management should always maximize…

“Management should always maximize sales of the product with the highest contribution margin per unit.” Do you agree? Why?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 15MC: When operating in a constrained environment, which products should be produced? A. products with the...

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In a manufacturing setting, "the best short-term profit maximization approach is to maximize contribution unit times the number of units sold." Discuss the truthfulness of the statement and show by way of examples how you would set about demonstrating the accuracy of such a statement.
In order to determine the optimal sales mix for a company, one should evaluate the contribution margin per unit of whatever the scarce resource is True or Faise
When constrained by a limiting resource, managers often seek to produce those products which have: a)The highest selling prices. b)The lowest average cost per unit. c)The highest contribution margin ratios. d)The highest contribution margin per unit of limiting resource.
Consider a situation in which a firm needs to make a decision regarding the resources to allocate between two products. One product makes a significantly larger contribution margin than the other. How might the contribution margin affect the decision that the firm makes? What if both contribution margins were positive or both were negative? Are there other factors when considering the contribution margin you should look for? What makes the contribution margin positive or negative?
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Management should focus its sales and production efforts on the product or products that will provide the a.lowest product costs b.highest sales revenue c.maximum contribution margin d.lowest direct labor hours
In a product mix decision, which is the mostimportant factor to consider in order to try tomaximise profit? contribution per unit of the productproduct unit selling pricevariable cost per unit of the productcontribution per unit of a scarce resource used to make the product
In deciding which product lines to emphasize when a production constraint exists, the company should focus on the product line that has the highest contribution margin per unit of product. contribution margin per unit of the constraint. profit per unit of product. contribution margin ratio.
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