Question

Sage Corporation manufactures two products with the following characteristics. Unit Contribution Margin Machine Hours Required for Production Product 1 $42.00 0.15 hours Product 2 $32.00 0.10 hours If Sage’s machine hours are limited to 2,000 per month, determine which product it should produce. Product 1 Product 2 Contribution margin per unit of limited resource $Enter a dollar amount $Enter a dollar amount Sage Corporation should produce Select an option Product 1Product 2 LINK TO TEXT

Answer 1

Solution

	Product 1	Product 2
Contribution margin per limited resource	$               280.00	$          320.00

.Sage Corporation should produce Product 2

Working

	Product 1	Product 2
Contribution margin per unit	$                 42.00	$            32.00
Divided by: Machine Hours required per unit	0.15	0.10
Contribution margin per limited resource	$               280.00	$          320.00

The company will earn more if Product 2 is produced as it gives highest contribution margin per limited resource.