Detailed Answer
Answer (C) is correct.
A basic principle of the theory of constraints (TOC) is that short-term
profit maximization requires maximizing the contribution margin
through the constraint. To determine the maximum contribution margin
per product, the number of units producible given the constraint is
multiplied by the contribution margin per unit. Given a constraint of 60
hours per month, this company can produce either 15 units of Product A
(60 ÷ 4 hours) or 24 units of Product B (60 ÷ 2.5 hours). Manufacturing
Product A will increase the contribution margin by $1,425 ($95 × 15
units). However, producing Product B would only increase the
contribution margin by $1,320 ($55 × 24 units).