This preview shows page 1. Sign up to view the full content.
Unformatted text preview: is said to have
a constraint. The machine or process
that is limiting overall
output is called the
bottleneck – it is the
LO 3 Utilization of a Constrained Resource
When a constraint exists, a company should select a product mix that maximizes the total
contribution margin earned since fixed costs
usually remain unchanged.
A company should not necessarily promote
those products that have the highest unit
Rather, it should promote those products that
earn the highest contribution margin in relation
to the constraining resource.
LO 3 Utilization of a Constrained Resource:
Ensign Company produces two products and selected data
are shown below: LO 3 Utilization of a Constrained Resource Machine A1 is the constrained
Machine A1 is the constrained resource and is being used at 100%
resource and is being used at 100%
off its capacity.
o its capacity. There is excess capacity on all other
There is excess capacity on all other
machines. Machine A1 has a capacit...
View Full Document