Question

CH 9-10-12 Help Save & Exit Saved Sub An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data conceming those products appear below: JO $167.16 $301.50 $417.57 $196.29 $320.72 LN RO Selling price per unit Variable cost per unit $97.16 6.30 6.50 Minutes on the constraint 3.50 0.38:11 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.) Multiple Choice LN, JQ, RQ RQ, LN, JQ RQ, JQ, LN Graw Hill <Prev 20 of 21 Next >

Answer 1

When a bottleneck constraint ( limited quantity of a resource ) is there, we have to calculate contribution margin per unit of the limited resource ( in present case contribution margin per minute of the automated turning machine) in order to rant the products from highest contribution margin per minute to lowest contribution margin per minute of the limited resolurce. The following table shows the calculations :

Calculations	Particulars	LN	JQ	RQ
A	Selling Price per unit	167.16	301.50	417.57
B	Variable costs per unit	97.16	196.29	320.72
C = A - B	Contribution margin per unit	70.00	105.21	96.85
D	Minutes of the machine used	3.50	6.30	6.50
E = C / D	Contribution margin per minute	20.0	16.7	14.9
F = E Highest to lowest	Ranking	1	2	3

So, as per above calculations, the ranking is LN, JQ, RQ and option A is the correct option