Question
Spring, Inc. manufactures two products. It currently has 1,000 hours of direct labor and 2,000 hours of machine time available per month. The table below
Spring, Inc. manufactures two products. It currently has 1,000 hours of direct labor and 2,000 hours of machine time available per month. The table below lists the contribution margin, labor and machine time requirements, and demand for each product.
Product A | Product B | |
Unit Contribution Margin | $15 | $12 |
Demand | 1,000 units | 2,000 units |
Labor time | 3/4 hour | 1/2 hour |
Machine time | 1 hour | 1/2 hour |
Required:
Identify the constrained resource. Explain why.
Based on your answer to the previous question, identify which products should be prioritized. Explain why.
Based on your answers to the previous questions, determine the contribution margin if the company prioritizes production according to its limited resources.
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