Question

Utility of a restricted resource The School Pack company manufactures packages for the school with a...

Utility of a restricted resource The School Pack company manufactures packages for the school with a very resistant plastic bottom. It has three models that are the best sellers. The following table gives you information about these models.
Sale Price per Unit
Mod A$ 110
Mod B$ 150
Mod C$ 87.50
Variable cost per unit
Mod A$ 30
Mod B$ 60
Mod C $27.50
Processing time in the plastic machine for each unit
Mod A 3 mins
Mod B 4 mins
Mod C 1 min
Amount of plastic per unit (in pounds) Mod A 4 lbs
Mod B 5 lbs
Mod C 3 lbs

The restricted resource is the processing time on the machine. 1. Determine the highest and lowest performance model in the use of processing time as a restricted resource. 2. Determine the highest and lowest performance model in the use of plastic if this is the restricted resource. 3. Determine the model that has the highest contribution margin. Was this model the one with the highest performance in the previous answers? If it was not, explain why.
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Answer #1

Models

A

B

C

Sale price

110

150

87.5

Variable cost

30

60

27.5

Contribution (sales - VC)

80

90

60

Processing time

3

4

1

Mins

Plastic per unit in pounds

4

5

3

Lbs

20

15

60

1600

1350

3600

25

20

33

2000

1800

2000

1. Highest & lowest performance model - as per Processing Time

Contribution Per minute

27

22.5

60

remarks

Lowest

Highest

2. Highest & lowest performance model - as per use of plastic

Assuming we have 100 lbs plactic with us

No of units can be made with 100 lbs each

25

20

33.3

Contribution

2000

1800

2000.0

Remarks

Highest

Lowest

Highest

3. Highest Contribution margin Model-B

Highest

No this is not the highest performance products because it is taking more time for production and more plastic as compared to other two models.

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