CIMA BA2 · Chapter 11 · Question 7 of 12
Machine hours are in short supply. Details of three products are: Product A: contribution $30 per unit, 2 machine hours per unit Product B: contribution $42 per unit, 4 machine hours per unit Product C: contribution $25 per unit, 1.25 machine hours per unit In what order should the products be ranked for production to maximise contribution?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) C, A, B
Explanation
Rank by contribution per unit of the limiting factor: A = $30 / 2 = $15.00; B = $42 / 4 = $10.50; C = $25 / 1.25 = $20.00 per machine hour. The ranking is C, A, B. Ranking by contribution per unit (B, A, C) is incorrect when a resource is scarce.
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