Brittman Corporation makes three products that use the current constraint-a part

Question

Brittman Corporation makes three products that use the current constraint-a particular type of machine. Data concerning those products appear below:

IP NI YD
Selling price per unit $183.57 $207.74 $348.15
Variable cost per unit $144.42 $155.04 $269.50
Minutes on the constraint 2.90 3.40 5.50

Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?

A. $13.50 per minute
B. $78.65 per unit
C. $15.50 per minute
D. $39.15 per unit
***Please SHOW HOW to get this!

Explanation / Answer

Answer is A. If you calculate variable margin/minute you get 13.5, 15.5, and 14.3 respectively.

So you would be willing to pay up to 13.50/minute for the constrained resource.

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