A company can sell any mix of Product A and Product B at full capacity. The company has 100,000 hours of capacity. The demand for each product exceeds capacity. It takes one hour to make one unit of Product A and two hours to make one unit of Product B. The following information is available:
Product A Product B
Units produced from capacity available 100,000 50,000
Contribution margin per unit $20 $30
If capacity is the limiting factor, which product should be produced?
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