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What is Product-Mix Decisions with Capacity Constraints?
When a company makes multiple products, there is often an issue about the sales mix or the product mix that will offer the highest profits. While determining the most profitable or optimal sales mix, the products offering the optimal contribution has to be maintained and increase their production. The company should altogether drop or reduce the production of all those products that have relatively lower contribution.
Product-Mix Decisions with Capacity Constraints is important in understanding how a company decides which product is prioritized over constrained resources. While working with an optimum product mix, it has to be decided which product can have the highest margin of contribution for every hour of constrained resource. It has to be seen whether any other constraints exist, for instance any limit to the total number of units of either item that can be sold.
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Product-Mix Decisions with Capacity Constraints Exploring deeper
Product-Mix Decisions with Capacity Constraints is important in Finances. Resources happen to be a finite element. Any business has just a specific number of man hours, equipments and space. Although a company can expand its capacity in the long term, it has to take vital decisions in the short term for maximizing its profits. Constrained resources need businesses for making decisions regarding the products to manufacture and in how many numbers.
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