Question

Question 5 1 pts Miller Corp. produces 2 products with the following characteristics: Product A $75 Product B $60 Sales revenue Cost of goods sold: Variable costs Fixed costs Selling and administrative costs Variable costs Fixed costs Machine hours required to produce 1 unit Assuming that it can rent another machine and increase production by 8,000 machine hours, how should it use the additional machine time to maximize its income? Produce only Product A. Use 4,000 hours to produce A and 4,000 to produce B. O Produce only Product B. Use 5,000 hours to produce A and 3,000 to produce B.

Answer 1

Correct answer--------Produce only product B

Working

Statement of ranking indicating which product to produced first and second
	Product
	Product A	Product B
Sales price per unit	$           75.00	$               60.00
Variable cost per unit	$           46.00	$               37.00
Contribution margin per unit	$           29.00	$               23.00
Machine hours per unit	4.00	3.00
Contribution margin per machine hour	$              7.25	$                  7.67
Ranking	II	I	II
Produce	Second	First

Product B has high contribution margin per limited resourses hence product B should be produces to get high returns.