Chapter 12 Full Student Version [Read-Only]

A company should not necessarily promote company

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Unformatted text preview: uld not necessarily promote company those those products that have the highest unit contribution margin. Rather, Rather, it should promote those products that earn the highest contribution margin in relation to the constraining resource. 12-29 Example: Utilization of a Constrained Resource Utilization of a Constrained Resource Ensign Company produces two products and selected data are shown below: Machine Machine A1 is the constrained resource and is being used at 100% of its capacity. There There is excess capacity on all other machines. Machine Machine A1 has a capacity of 2,400 minutes per per week. Product 2 1 Selling Selling price per unit Less variable expenses per unit Contribution margin per unit Current demand per week (units) Contribution margin ratio Processing time required on machine A1 per unit $ 60 36 $ 24 2,000 40% 1.00 min. 12-30 $ 50 35 $ 15 2,200 30% Should Ensign focus its efforts on Product 1 or Product 2? 0.50 min. 12-31 Utilization of a Constrained Resource The key is the contribution margin per unit of the constrained resource. Product 2 24 $ 15 1.00 min. ...
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This note was uploaded on 04/01/2014 for the course RSM 222 taught by Professor D.cianflone during the Winter '10 term at University of Toronto- Toronto.

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