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The constraint at Johngrass Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: UE BI CR Selling price per unit $335.18 $228.46 $199.21 Variable cost per unit $259.26 $173.08 $159.61 Minutes on the constraint 7.50 4.30 5.50 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?

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Answer:

Explanation:

                                             UE              BI              CR

Selling price per unit      $335.18       $228.46     $199.21

Variable cost per unit    $259.26       $173.08      $159.61

Contribution margin       $75.92         $55.38       $39.60

Per unit (a)

Amount of constraint      7.50              4.30            5.50

resources required to

produced one unit (b)

Contribution margin

per unit of the                  $10.12           $12.86         $7.20

constraint resources

(a) / (b)

Ranking                             2                     1                  3

The company should be willing to pay up $7.20 per minute to produce more CR

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