Question

QUESTION 18

1. Alamo Corporation processes all of its products through a lathe machine. The lathe is only available for 60 hours per week and is the constraint for all of the products. Data regarding Alamo Corporation's three products follows:

   	Product A	Product B	Product C
   Selling price per unit	$75.00	$60.00	$90.00
   Variable cost per unit	$45.00	$35.00	$80.00
   Minutes of lathe time required per unit	15	20	10

   In what order should Alamo Corporation emphasize its products to maximize its contribution margin? (Rank the products in order from most profitable to least profitable.)

   		Product B, Product A, Product C
   		Product A, Product C, Product B
   		Product B, Product C, Product A
   		Product A, Product B, Product C
   		Product C, Product B, Product A

Answer 1

Computation of contribution per minute and ranking of products Particulars Selling Price per unit Variable cost per unit Product A Product B Product C 90 80 60 Less: Contribution Minutes required 30 15 25 20 10 10 Contribution per minute 1.25 Ranking 1st 2nd 3rd (as per highest contribution per minute) Answer is ------ -------> Product A, Product B , Product C (based on ranking)

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