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Unformatted text preview: uld 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. 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 is excess capacity on all other
Machine A1 has a capacity of 2,400 minutes
per week. Product
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
1.00 min. 12-30 $ 50
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
1.00 min. Ã...
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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.
- Winter '10