Question

The following information applies to the products of Solomon Company. Product Product B Selling price per unit Variable cost per unit $14 12 $13 10 Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately.

Answer 1

1) Contribution margin per labor hour

	Product A	Product B
Contribution margin per unit	2	3
Labor hour per unit	1	5
Contribution margin per hour	2	0.60
Product should be produced	Product A

2) Contribution margin

	Product A	Product B
Total Contribution margin	13000*2 = 26000	11000*3 = 33000
Product B should be sold