Respuesta :
When production facilities are limited, the company should produce the mix that will not exceed demand and maximize the production of the product with the highest contribution margin per unit of scarce resources.
When a company sells a variety of products, some are likely to be more profitable than others. Management concentrates sales efforts on more profitable products.
Suppose if production facilities or other factors are limited, producing more of one product usually means producing less of others. In this case, the management must identify the most profitable combination, or sales mix of products. Thus, here the management focuses on the contribution margin per unit of scarce resource.
Hence, when production facilities are limited, the company should produce the mix which will not exceed demand.
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