Question

The constraint at Bonavita Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:UN ZG PWSelling price per unit $ 282.30 $ 483.74 $ 524.62 Variable cost per unit $ 192.42 $ 346.68 $ 385.18 Minutes on the constraint 4.20 7.70 8.40 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

Answer 1

Answer:

1st   UN  $ 113.03

2nd PW  $ 108.31

3rd  ZG   $ 107.85    

Explanation:

$\left[\begin{array}{cccc}&UN&ZG&PW&Sales&282.3&483.74&524.62&Variable&192.42&346.68&385.18&CM&474.72&830.42&909.8&Constrain \:resource&4.2&7.7&8.4&CM \:per \:constrain&113.029&107.85&108.31&\end{array}\right]$

We first calculate the unit contribution margin:

$Sales \: Revenue - Variable \: Cost = Contribution \: Margin$

Then we divide this Contribution by the scarce resource.