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What should be emphasized in decision making process



Given the information provided below, do you agree or disagree with the following statement? Support your conclusion. “A company that makes stained glass window hangings cannot meet the demand for the window hangings due to a limited supply of artists who know how to work with stained glass. To determine which models of the stained glass window hangings should be emphasized, the company should rank the models by dividing the unit contribution of each model by the selling price of the model.”

The statement, “To determine which models of the stained glass window hangings should be emphasized, the company should rank the models by dividing the unit contribution of each model by the selling price of the model,” is incorrect.

Relative profitability is concerned with ranking products, customers, and other business segments to determine which should be emphasized. In general, relative profitability of segments should be measured by the profitability index. The profitability index equals the incremental profit from the segment divided by the amount of the constrained resource required by the segment.
 
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