Question

	9P				8L				7N
Selling price per unit	$	404.58			$	478.74			$	358.44
Variable cost per unit	$	308.88			$	371.30			$	285.36
Time on the constraint (minutes)		6.60				7.90				5.80

In your written report respond to the following:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized.
b. Assume that sufficient constraint time is available 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?

Answer 1

Solution 1:

Computation of contribution margin per minute
Particulars	9P	8L	7N
Selling price per unit	$404.58	$478.74	$358.44
Variable cost per unit	$308.88	$371.30	$285.36
Contribution margin per unit	$95.70	$107.44	$73.08
Time on constraint (In minutes)	6.60	7.90	5.80
Contribution margin per minute	$14.50	$13.60	$12.60
Rank	1	2	3

Solution 2:

Least profitable product is 7N, therefore company will to pay $12.60 per minute to acquire more of the constrained resource.