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12.53 - generates more contribution margin per hour of...

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12.53. (25 min) Managing scarce resources. a. The machining time necessary to fill the maximum monthly sales orders is 5x15,000 + 3x10,000 = 105,000 hours, which exceeds the time available. b. The guideline when a single production constraint exists is to maximize the value produced from the scarce resource. This is indicated by the contribution margin generated per hour (assuming all production can be sold). S109 T678 Unit contribution margin $8 $6 Machine hours per unit 5 hours 3 hours Maximum monthly sales 15,000 units 10,000 units Contribution margin per hour $1.60 $2.00 Although S109 has a higher unit contribution margin, T678
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Unformatted text preview: generates more contribution margin per hour of scarce resource. Thus, using the scarce resource to produce as much T678 as can be sold will generate more profit than focusing on S109. c. A schedule follows. Product T678 S109 Total Machine hours avail. 90,000 60,000 90,000 Sales 10,000 60,000 ÷ 5 = 12,000 Machine hours used 3 x 10,000 = 30,000 5 x 12,000 = 60,000 90,000 Machine hours avail. 90,000 – 30,000 = 60,000 60,000 – 60,000 = 0 Contribution $6 x 10,000 = $8 x 12,000 = $156,000 margin $60,000 $96,000...
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