Question

When a constraint exists, a company should select a product mix that maximizes a. Total Fixed...

When a constraint exists, a company should select a product mix that maximizes

a. Total Fixed margin

b. Total Variable margin

c. Total transfer margin

d. Total contribution margin



Select one:
a. Total Fixed margin
b. Total contribution margin
c. Total transfer margin
d. Total Variable margin
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Answer #1

Ans b. Total contribution margin

When a constraint exists a company should select a product mix that maximizes the total contribution margin earned since fixed costs remain unchanged.

Total Contribution = Sales Price - Variable cost

Total Contribution Margin = (Sales Price - Variable cost) / Sales Price * 100

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