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Bertucci Corporation makes three products that use the current constraint whcih is a particular type of machine. Data concerning those products appear below:
| TC | GL | NG | ||||
| Selling price per unit | $ | 494.40 | $ | 449.43 | $ | 469.68 |
| Variable cost per unit | $ | 395.20 | $ | 320.21 | $ | 373.92 |
| Minutes on the constraint | 8.00 | 7.10 | 7.60 | |||
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?
Multiple Choice
$12.40 per minute
$18.20 per minute
$129.22 per unit
$95.76 per unit
Expert Answer
| TC | GL | NG | |
| Contribution margin/unit(Selling price-Variable costs) | ($494.4-$395.2)
=$99.2 |
($449.43-$320.21)
=$129.22 |
($469.68-$373.92)
=$95.76 |
| Contribution margin/minute(Contribution margin/Minutes on the constraint) | ($99.2/8)
=$12.4 |
($129.22/7.1)
=$18.2 |
($95.76/7.60)
=$12.6 |
Hence the company should be willing to pay for the least profitable product (TC) ie $12.4/minute(A).
