Certified Management Accountant Decision Analysis 4

Question 1

When a single production constraint exists, the optimal product mix is determined by ranking products according to:

Accepted Answer

Highest contribution margin per unit of the constrained resource

Answer

With one binding constraint, maximizing contribution margin per unit of that constrained resource (e.g., machine hours) yields the optimal mix.

Question 2

Product X yields $6 CM and requires 2 machine hours. Product Y yields $4 CM and requires 1 machine hour. Machine capacity is limited. Which product should be prioritized?

Accepted Answer

Y; its CM per machine hour ($4) exceeds X's CM per machine hour ($3)

Answer

CM per machine hour: X = $6/2 = $3; Y = $4/1 = $4; Product Y is more profitable per constrained resource.

Question 3

In a linear programming model for product mix, the 'feasible region' is defined as:

Accepted Answer

The set of all variable combinations satisfying all constraints simultaneously

Answer

The feasible region is the solution space where every constraint (resource, demand, non-negativity) is satisfied at the same time.

Question 4

The shadow price (dual value) of a binding constraint in linear programming represents:

Accepted Answer

The increase in the optimal objective function value from one additional unit of the binding constraint

Answer

Shadow price measures how much the objective function (e.g., total contribution margin) would improve with one additional unit of the binding resource.

Question 5

A company produces three products competing for a bottleneck machine. Product A: CM $20, 4 hrs. Product B: CM $15, 2 hrs. Product C: CM $18, 3 hrs. The optimal ranking is:

Accepted Answer

B, C, A (by CM per bottleneck hour descending)

Answer

CM/hr: A = $5, B = $7.50, C = $6; ranking by CM per bottleneck hour gives B ($7.50), C ($6), A ($5).

Certified Management Accountant Practice Test

Certified Management Accountant Practice Test

Certified Management Accountant Decision Analysis 4