Gastineau Corporation\'s two products have the following characteristics: W47E S

Question

Gastineau Corporation's two products have the following characteristics: W47E Selling price Unit variable cost Monthly demand (units570 J45Z $375.00 $258.00 $264.00 $174.00 090 The constrained resource is a particular machine that is available for 11,000 minutes each month. Each unit of product J45Z requires 15 minutes on this machine and each unit of product W47E requires 8 minutes on this machine. Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?

Explanation / Answer

J45Z W47E Selling price 375 258 Unit variable cost 264 174 Unit contribution margin 111 84 Minutes per unit 15 8 Contribution margin per minute 7.4 10.5 Preference 2 1 Minutes required to meet W47E's demand = 1090*8= 8720 The company can pay upto $7.4 per minute to satisfy demand of existing products

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