B Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below:

	GK		LQ		XK
Selling price per unit	$	326.25	$	543.51	$	502.00
Variable cost per unit	$	251.98	$	420.79	$	397.64
Time on the constraint (minutes)		3.30		7.30		8.00

Required:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized. (Show your calculations) (5 marks)

b. 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? (Round your answer to 2 decimal places.) (1 mark)

Part B (6 marks)

The SP Corporation makes 41,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is:

Direct materials	$ 10.00
Direct labor	$ 9.00
Variable manufacturing overhead	$ 3.70
Fixed manufacturing overhead	$ 4.65

An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $25.45. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company.

Required: Write a memo to the President of SP Corporation of your findings and recommendations on whether the company should make or buy the motors. Do make sure to provide detailed explanations of your findings.