Contribution Margin per Unit of a Critical Resource
Response to the following problem:
Haws Electronics produces two products, CD players and clock radios. Both products are extremely popular, and the company can sell as many of either product as it can produce. Haws Electronics can produce only a limited number of products, however, because only 12,000 direct labor hours are available due to the isolated location of the community. It takes four hours of direct labor to produce a CD player and three hours to produce a clock radio. The selling price of a CD player is $68, and the variable costs are $40. The selling price of a clock radio is $52, with variable costs of $28.
Which product should Haws Electronics produce if its direct labor hours are limited?