Smith Company makes three different products, each of which must pass through one very expensive machine. Assuming that availability of machine time is limited to 4,000 hours per year, which is less than the 5,000 hours demanded, how should the company decide which product to make?
What will be an ideal response?
Answers will vary
The machine represents a constraint or bottleneck. If nothing can be done to increase the availability of machine time, the company should make the product that offers the greatest contribution margin per hour of machine time.
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