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4. Utilization of Constrained Resource ABC, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Selling
4. Utilization of Constrained Resource ABC, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Selling price Variable costs Fixed costs Grinding machine time (minutes) Product Product B $80 $60 50 40 2010 10 Product C $90 55 15 5 Fixed costs are applied to the products on the basis of direct labor hours. The company estimates that it can sell 250 units of each product per week. The grinding machine is the constraint, with only 2,400 minutes of grinding machine time available this week. Required: (a). Given the grinding machine constraint, which product should be emphasized? What is the maximum contribution margin that the company can earn if it makes optimal use of the grinding machine time? Support your answer with appropriate calculations. (15 points) aby how told the (b). Up to how much should the company be willing to pay for an additional minute of grinding machine time? (5 points)
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