Reference no: EM132715706

Questions -

(1) When a production constraint exists, the best measure of profitability is the:

a. differential revenue per production constraint.

b. unit contribution margin per production constraint.

c. markup per production constraint.

d. differential cost per production constraint.

(2) Zionade Company manufactures a certain type of alloy. The alloy undergoes a hardening process. The hardening unit is operating at full capacity and is a production constraint. The unit contribution margin and the number of hours of hardening treatment used by the alloy are as follows:

Unit selling price $97.50

Unit variable cost (22.50)

Unit contribution margin $75.00

Hardening treatment hours per unit 3 hrs.

Assuming Zionade produces 2,000 units of the alloy, calculate the unit contribution margin per production constraint hour.

a. $75 per hour

b. $33 per hour

c. $25 per hour

d. $98 per hour

(3) When a company attempts to maximize its profits, subject to its production constraint, it uses _____.

a. the unit contribution margin of each product per production constraint

b. the unit target cost of each product per production constraint

c. the unit selling price of each product per production constraint

d. the unit product cost of each product per production constraint

(4) Which of the following formulas is used to calculate the unit contribution margin per production constraint?

a. Unit variable cost / Production constraint per unit

b. Unit contribution margin / Production constraint per unit

c. Unit selling price / Unit contribution margin

d. Unit contribution margin / Unit selling price