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ACCA Applied Skills · Performance Management · Make-or-buy and other short-term decisions

Zeta Co makes three products, all in demand with no sales limits. Skilled labour is the only scarce resource. Contribution per unit: Product A $24 using 4 hours; Product B $30 using 6 hours; Product C $18 using 2 hours. Which ranking gives the order in which production should be prioritised?

The order is C, A, B. With skilled labour as the only constraint, products are ranked by contribution per scarce hour: C earns $9, A earns $6 and B earns $5. Ranking by unit contribution would wrongly favour B.

  1. AC, A, BCorrect
  2. BB, A, C
  3. CA, B, C
  4. DC, B, A

Explanation

Contribution per labour hour: A 24/4 = $6; B 30/6 = $5; C 18/2 = $9. Rank C first, then A, then B. Ranking by contribution per unit (B, A, C) ignores the scarce resource and is wrong.

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