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 $ 161.88 $ 350.41 $ 446.71
Variable cost per unit $ 116.12 $ 279.11 $ 338.71
Minutes on the constraint 2.60 4.60 7.50
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
A. LN, JQ, RQ
B. RQ, LN, JQ
C. RQ, JQ, LN
D. JQ, RQ, LN

Answer 1

Answer:A. LN, JQ, RQ

Explanation:

To know the current profitability, we need to determine the contribution margin unit  by the minutes on the constraints .

a) For LN  

Contribution by unit =  Selling price per unit- Variable cost per unit

$ 161.88 -$116.12 = $45.76

Contribution by the minutes = Contribution by unit / Minutes on the constraint

= $45.76/ 2.60 = 17.60

B) For JQ

Contribution by unit =  Selling price per unit- Variable cost per unit

$ 350.41 -$279.11 = $71.3

Contribution by the minutes = Contribution by unit / Minutes on the constraint

= $71.3/ 4.60 = 15.50

c) For RQ  

Contribution by unit =  Selling price per unit- Variable cost per unit

$ 446.71 -$338.71 = $108

Contribution by the minutes = Contribution by unit / Minutes on the constraint

= $108/ 7.50 = 14.40

In order of their current profitability from most profitable to least profitable, We have LN with 17.60, next JQ with 15.50 and the least RQ with 14.40