Answer (D) is correct . When demand far exceeds a company’s ability to supply the marketplace, management will want to maximize its profits per unit of scarce resource. If the scarce resource is raw materials, the products that provide the greatest contribution margin per unit of raw materials are the products to emphasize. If machine hours are the constraint, profits are maximized by emphasizing the contribution margin per machine hour.
Answer (A) is incorrect because Focusing on high gross margin products does not maximize profits if those products require an excessive amount of resources.
Answer (B) is incorrect because The company can sell as much of each product as it can produce. Thus, sales are limited by production constraints, e.g., machine hours. The company should therefore seek to maximize its return per unit of the constraint.
Answer (C) is incorrect because The contribution margin ratio is only important as it translates to dollars. A high margin on a low sales volume will not be profitable.
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