The constraint at Johngrass Corporation is time on a particular machine. The com

Question

The constraint at Johngrass Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: UE BI CR Selling price per unit $335.02 $228.30 $199.05 Variable cost per unit $259.58 $173.40 $159.93 Minutes on the constraint 5.90 4.20 3.90 Assume that sufficient time is available on the constrained machine 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

Explanation / Answer

since it is said suffiient time is available on the constrained machine to satisfy demand for all but least profitable product ,so product "BI and UE" can be produced fully .

For product CR ,maximum price willing to pay = $ 10.03 per minute

UE BI CR selling price 335.02 228.30 199.05 Variable cost (259.58) (173.40) (159.93) contribution per unit (A) 75.44 54.90 39.12 Minuted required per unit (B) 5.90 4.20 3.90 contribution per minute (A/B) 12.79 13.07 10.03 Ranking 2 1 3

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