Brissett Corporation makes three products that use the current constraint, which

Question

Brissett Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below:

Required:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized.

b. 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? (Round your answer to 2 decimal places.)

GK LQ XK Selling price per unit $ 326.37 $ 543.63 $ 496.00 Variable cost per unit $ 251.92 $ 420.73 $ 397.58 Time on the constraint (minutes) 2.70 6.70 8.00

Explanation / Answer

a Answer :-

Resulting ranking of products = GK , LONDON, XK

b Answer :- The company should be willing to pay upto $12.30 per hour minutes to obtain more of the constrained resource because this is the value to the company of using this constained resource to make more of product XK. By assumption enough of the other two products will already have been produced to fully satisfy denmanda.

PARTICULARS GK LQ XK Selling private per unit $326.37 $535.63 $496.00 Variable costs per unit $251.92 $420.73 $397.58 Contribution margin per unit (III = I +II) $74.45 $122.90 $98.42 Time of the contains the (minutes) 2.70 6.70 8.00 Contribution margin per nun it occurs the constrained resources $27.57 $18.34 $ 12.30 RANKING 1 2 3

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