Question

Bertucci Corporation makes three products that use the current constraint which 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

Answer 1

Answer:

The company should be willing to pay for the least profitable product (TC) which is $12.4/minute

Explanation:

                                                          TC               GL             NG

Contribution margin / unit              $99.2      $129.22     $95.76

(Selling price-Variable costs)

Contribution margin/minute          $12.4         $18.2            $12.6

(Contribution margin/Minutes

on the constraint)

Conclusion: Hence, the company should be willing to pay for the least profitable product (TC) which is $12.4/minute

Working

Contribution margin / unit = Selling price-Variable costs

TC= $494.4 - $395.2 = $99.2

GL= $449.43-$320.21 = $129.22

NG= $469.68-$373.92 = $95.76

Contribution margin/minute

TC= $99.2 / 8 =$12.4

GL= $129.22/7.1 =$18.2

NG= $95.76/7.60 =$12.6