Case: Utilization of a Constrained Resource SellaChem, Inc., sells a wide range of industrial equipment that are used in factories. One of the company's products is Metal Box. Production is constrained by the capacity of an automated processing machine that is used to process the surface. A total of 3,000 hours of processing time is available monthly on the machine. Because each box requires 6 hours of processing time, monthly production is limited to 500 boxes. At present, the processing machine is used exclusively to make the metal boxes. The accounting department has provided the following financial data concerning the boxes: Metal Boxes Selling price per drum Cost per drum: Direct materials (Variable) $ 160 $25 Direct labor (Variable) 13 Variable Manufacturing overhead 12 Fixed Manufacturing overhead 21 Variable Selling and administrative expense Fixed Selling and administrative expense 28 81 Margin per box $ 79 Management believes 700 Boxes could be sold each month if the company had sufficient processing capacity. As an alternative to adding another processing machine, management has considered buying additional boxes from an outside supplier. Kinda Industries, Inc., a supplier of quality products, would be able to provide up to 500 metal boxes per month at a price of $140 per box, which SellaChem would resell to its customers at its normal selling price after appropriate relabeling. It has been estimated that variable selling and administrative expenses amount to $2 per metal box whether it was made or purchased. Emily Qun, SellaChem's production manager, has suggested that the company could make better use of the processing machine by manufacturing Aluminum rods, which would require only 4 hours of processing time per rod and yet sell for far more than the boxes. Emily believes that SellaChem could sell up to 200 rods per month at a price of $200 each. The accounting department has provided the following data concerning the proposed new product: Aluminum rods Selling price per frame Cost per frame: Direct materials (Variable) Direct labor (Variable) Variable Manufacturing overhead Fixed Manufacturing overhead Variable Selling and administrative expense Fixed Selling and administrative expense Margin per rod $200 $80 28 22 24 26 162 $ 38 The aluminum rods could be produced with existing equipment and personnel. As indicated earlier, the company has a processing machine that can give only 3,000 hours of processing time. Therefore, it is a constrained resource. Assume that the cost of using the processing machine is fixed with respect to processing time. You want to make decisions in such a way to maximize the company's profit.