A company sells two products with information as follows:
A B
Sales price per unit $15 $21
Variable cost per unit $4 $13
Products are made by machine. Four units of product A can be made with three machine hours and five units of product B can be made with 0.7 machine hour.
1. If there are no constraints on production or sales of either product, then the company should emphasize sales of product B.
O True O False

True.

Explanation:

The Contribution margin i.e Sale price less Variable Cost per unit for product A is (15-4) is $11 & for product B is ( 21-13) is $8. for making 4 units of product A we need three machine hours, so if we divide units by machine hours only 0.9 unit of A can be made in an hour  while we can made 5 units in 0.7 hours pf product B, so if we divide 5 by 0.7, approximately 7 unit of B can me made in an hour.

Thus, in the production of 1 hour we can make $10 from product A while we can make $ 57 from product B.

Product AProduct B

S.P  $15.00   $21.00  

V.C  $4.00   $13.00  

Contribution Margin Per unit  $11.00   $8.00  

Units Produce Per hour Production0.97

CM Per hour  $10.27   $57.14  

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