The constraint at Dalbey Corporation is time on a particular machine. The compan

Question

The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

                                            FE      MB         WP
Selling price per unit         $258.00 $363.80 $179.40
Variable cost per unit        $188.00 $271.88 $129.44
Minutes on the constraint    5.00     6.80         3.80
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 this constrained resource? $13.15 per minute or $14.00 per minute or $49.96 per unit or $91.92 per unit

Explanation / Answer

Price Per Unit for FE = 258-188 = 70 Price Per Unit for MB = 363.8-271.88 = 91.92 Price Per Unit for WP = 179.40-129.44 = 49.96 Price per Minute for FE = 70/5 = $14 Price Per Minute for MB = 91.92/6.8 = 13.51765 Price Per Minute for WP = 49.96/3.8 = 13.14737 The least profitable unit per minute is WP at $13.15 per minute or $49.96 per unit.

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