Jago Co. has 2 products that use the same manufacturing facilities and cannot be subcontracted. Each product has sufficient orders to utilize the entire manufacturing capacity. For short-run profit maximization, Jago should manufacture the product with the:
a. Greater contribution margin per hour of manufacturing capacity.
b. Greater gross profit per hour of manufacturing capacity.
c. Lower total manufacturing costs for the manufacturing capacity.
d. Lower total variable manufacturing costs for the manufacturing capacity.
【答案解析】A
Explanation
Choice "a" is correct. To maximize profit at full capacity, contribution margin per hour should be maximized.
Choice "c" is incorrect. To maximize profit, the sales price of the products must also be considered.
Choice "d" is incorrect. To maximize profit, the sales price of the products must also be considered.
Choice "b" is incorrect. Contribution margin is a better measure of profit maximization than gross profit because it includes all variable costs. Gross margin includes consideration of cost of goods sold, but may exclude other variable costs, such as selling, general, and administrative costs.
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