Question

Corporation has a time contraint on one of its special machines. The company makes three products that use this machine. Data concerning those products appear below:

Magnifico Bellissimo Lovely
Selling price per unit $335.07 $228.35 $199.10
Variable cost per unit $259.48 $173.30 $159.83
Minutes on the constraint 6.40 3.20 4.40

Required:
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product (Q) Up to how much should od be willing to pay to acquire more of the constrained resource?

Answer 1

Answer: $8.925 per minute.

Explanation:

Based on the information given, the amount that the company should be willing to pay to acquire more of the constrained resource will be:

= (Selling price – variable cost)/Constrained Minute

= ($199.10 - $159.83) / 4.40

= $8.925 per minute

= $8.93 per minute

The answer is $8.93 per minute.