ACCTG322 Chapter Notes - Chapter 12: Opportunity Cost, Filet Mignon, Zippo
8 Apr 2014
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The company should accept orders first for beta, second for alpha, and third for omega. The computations are: (a) direct materials required per unit (b) cost per kilogram (c) kilograms required per unit (a) (b) (d) contribution margin per unit That is, they will assume that the way to spot the most profitable product is to find the one using the least amount of the constrained resource. The way to dispel this notion is to point out that alpha uses more material (the con- strained resource) than omega, but yet it is more profitable per unit of the constrained resource. The key factor is not how much of a constrained resource a product uses, but rather how much contribution margin the product generates per unit of the constrained resource. Less tour costs that can be avoided if the tour is discontinued: contribution margin lost if the tour is discontinued Room & meals, bus driver and tour guide
