Question
Constrained Resources. Creative, Inc., produces three types of products: basic, standard, and deluxe. The products are produced in separate departments and sent to the quality
Constrained Resources. Creative, Inc., produces three types of products: basic, standard, and deluxe. The products are produced in separate departments and sent to the quality testing department before being packaged and shipped. A labor-hour bottleneck has been identified in the quality testing department due to the high skill requirements of the job. Creative, Inc., would like to optimize its use of labor hours by producing the two most profitable products. Information for each product follows.
Production machine-hours Price Variable cost
Basic 1.25 $1,000 $400
standard 1.00 500 300
Deluxe 1.00 800 450
Required:
a. Calculate the contribution margin per unit of constrained resource for each product
b. Which two products would Creative, Inc., prefer to produce and sell to optimize the use of labor hours in the quality testing department?
Step by Step Solution
3.41 Rating (154 Votes )
There are 3 Steps involved in it
Step: 1
Ans a Contribution margin Price Variable cost 1 Contribution margin per unit pr...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started