Question

An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below:

LN JQ RQ
Selling price per unit $ 161.72 $ 350.32 $ 468.25
Variable cost per unit $ 118.94 $ 241.42 $ 342.92
Minutes on the constraint 2.30 6.60 8.30

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:

Product                              LN          JQ            RQ

Ranking                            1st        2nd        3rd

Explanation:

Whenever a company is faced with a limiting factor i.e a resource in short supply, the company should allocate the resource to the product with he highest contribution per unit of the scare resource .

Jordision should rank rank its products using contribution per minute of constraint

Ths is done as follows:

\Product                              LN          JQ            RQ

Selling price                       161.72    50.32     468.25

Variable cost                    (118.94)   (241.42)   (342.92)

Contribution (a)                        42.78      108.9    125.33

Minute        (b)                         2.30      6.60      8.30

Contribution/minute($)a/b          18.6 16.5   15.1

Ranking                                       1st        2nd        3rd