Question

An automated turning machine is the current constraint at Jordison Corporation. Three products use this constrained resource. Data concerning those products appear below:

		LN		JQ		RQ
Selling price per unit		$	162.51	$	302.50	$	405.26
Variable cost per unit		$	97.76	$	223.12	$	303.42
Minutes on the constraint			3.50		5.40		7.60

Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-09-13

Multiple Choice

• LN, JQ, RQ

• RQ, LN, JQ

• RQ, JQ, LN

• JQ, RQ, LN

Answer 1

• When there is a case of ‘resource constraint’ that one of the resource is in a limited quantity, then that product should be emphasized that has ‘maximum contribution margin per unit of that limited resource’.
• Working

		LN	JQ	RQ
A	Selling price per unit	$162.51	$302.50	$405.26
B	Variable cost per unit	$97.76	$223.12	$303.42
C = A/B	Contribution margin per unit	$64.75	$79.38	$101.84
D	Minutes on the constraint	3.5	5.4	7.6
E = C/D	Contribution margin per minute	$18.50	$14.70	$13.40
	Ranking	1st	2nd	3rd

• Correct Answer = Option #1: LN, JQ, RQ