Product A has a unit contribution margin of $24. Product B has a unit contribution margin of $30. Product A requires four testing hours, while Product B requires six testing hours. Determine the most profitable product, assuming the testing is a constraint.
Answer:
Product A Product B
Unit contribution margin……………………………………………… $24 $30
÷ Testing hours per unit……………………………………………… 4 6
Unit contribution margin per production bottleneck hour……… $ 6 $ 5
Product A is the most profitable in using bottleneck resources.
