The same constrained resource is used by four different products at Hinchcliffe

Question

The same constrained resource is used by four different products at Hinchcliffe Corporation. Data concerning those products appear below:

The company does not have enough of the constrained resource to satisfy for demand of all four products.

From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?

I200

I100

I400

I300

I100 I200 I300 I400 Unit selling price $37.20 $25.00 $13.80 $47.20 Unit variable cost $12.60 $7.30 $3.70 $33.00 Amount of the constrained resource required 0.50 0.34 0.24 0.56

Explanation / Answer

Profit of all the four different products is calculated as under:

As the sale of I300 is profitable so the salesperson should emphasize more on I300.

I100 I200 I300 I400 Unit selling price 37.2 25 13.8 47.2 Unit variable cost 12.6 7.3 3.7 33 Amount of the constrained resource required 0.5 0.34 0.24 0.56 Unit Profit 24.6 17.7 10.1 14.2

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