Question

The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: WX KD FS Selling price per unit $ 335.07 $ 228.35 $ 199.10 Variable cost per unit $ 259.48 $ 173.30 $ 159.83 Minutes on the constraint 6.40 3.20 4.40 Assume that sufficient time is available on the constrained machine 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? (Round your intermediate calculations to 2 decimal places.)

Answer 1

			WX	KD	FS
Selling price per unit			335.07	228.35	199.1
Lless: Variable cost per unit			259.48	173.3	159.83
Contribution margin per unit			75.59	55.05	39.27
Minutes required per unit			6.4	3.2	4.4
Contribution margin per minute			11.81	17.20	8.93
Ranking			II	I	III
FS is least profitable, earning contribution of $ 8.93 per minute
Therefore, the company is willing to acquire more of constrained resources for $ 8.93 per minute