The constraint at Pickrel Corporation is time on a particular machine. The compa

Question

The constraint at Pickrel Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: VD JT SM Selling price per unit Variable cost per unit Minutes on the constraint $344.85 $415.40 $119.32 $270.18 $310.88 $ 91.96 5.70 6.70 1.90 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.)

Explanation / Answer

Product having highest Contribution margin/limiting factor is ranked first (most profitable) while the one having least profit per limiting factor is ranked third.

VD JT SM Contribution margin/unit(Selling price-Variable cost) (344.85-270.18)=$74.67 (415.40-310.88)=$104.52 (119.32-91.96)=$27.36 Contribution margin/minute (74.67/5.70)=13.1 (104.52/6.70)=15.6 (27.36/1.90)=14.40 Rank 3 1 2

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