ACTG2020_Week5 2014 Ch12CMD (1)

O its capacity there is excess capacity on all other

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Unformatted text preview: y of 2,400 Machine A1 has a capacity of 2,400 minutes per week. minutes per week. Should Ensign focus its efforts on Product 1 or Product 2? LO 3 Quick Check How many units of each product can be processed through Machine A1 in one minute? Product 1 a. b. c. d. 1 unit 1 unit 2 units 2 units Product 2 0.5 unit 2.0 units 1.0 unit 0.5 unit LO 3 Quick Check What generates more profit for the company, using one minute of machine A1 to process Product 1 or using one minute of machine A1 to process Product 2? a. Product 1 b. Product 2 c. They both would generate the same profit. d. Cannot be determined. LO 3 Utilization of a Constrained Resource The key is the contribution margin per unit of the constrained resource. Product 2 should be emphasized. Provides more valuable use of the constrained resource machine A1, yielding a contribution margin of $30 per minute as opposed to $24 for Product 1. LO 3 Utilization of a Constrained Resource The key is the contribution margin per unit of the constrained resource. If there are no other consideratio...
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