The constraint at Johngrass Corporation is time on a particular machine. The com

Question

The constraint at Johngrass Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: $335.02 $228.30 $199.05 Selling price per unit Varlable cost per unit Minutes on the constralnt $25958 173.40 $159 93 3.90 5.90 4.20 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? calculations and final answer to 2 decimal places.) O S13.07 per minute O $75.44 per unit $3912 per unit $10.03 per minute

Explanation / Answer

The company should be willing to pay up to $10.03 per minute to obtain more of the constrained resource because this is the value to the company of using thisconstrained resource to make more of product LQ. By assumption, the other products will already have been produced up to demand.

VT UV LQ Selling price per unit $335.02 $228.30 $199.05 Variable cost per unit $259.58 $173.40 $159.93 Contribution margin per unit $75.44 $54.90 $39.15 Time on the constraint (minutes) 5.90 4.20 3.90 Contribution margin per unit of the constrained resource $12.79 $13.07 $10.03 Ranking 2 1 3

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