The constraint at Rauchwerger Corporation is time on a particular machine. The c

Question

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

Product WX:
Selling price per unit = $192.00
Variable cost per unit = $158.72
Minutes on the constraint = 3.20


Product KD:
Selling price per unit = $542.66
Variable cost per unit = $420.54
Minutes on the constraint = 8.60

Product FS:
Selling price per unit = $222.84
Variable cost per unit = $167.76
Minutes on the constraint = 3.60

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 resource?
$33.28 per unit
$10.40 per minute
$122.12 per unit
$15.30 per minute
show work please

Explanation / Answer

Product WX has profitability of $10.40/min on the constrained resource (192.00-158.72)/3.20. Similarly the next two have $14.20/min and $15.30/min. Therefore the company should be willing to pay up to $10.40 per minute.

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