o What is comstraining resource Labor hours 4000 units 3 min 7000 units 3 min

# O what is comstraining resource labor hours 4000

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o What is comstraining resource? Labor hours: 4,000 units * 3 min + 7,000 units * 3 min = 550 h < 560h Machine; 4,000 * 2 min + 7,000 * 1 min = 250 h > 220 h. So machine hours is constrained. Mountain = 7,5\$ / min - \$450 / h Touring = 12\$ min - \$720/h Decision: 1. Make 7000 units of touring = 7000 * 1 machine min = 116,6 machine hours 2. Make the rest mountain (3,100) Total contribution = \$130,500 What if you would have two capacity constraint? (E.g. also on labor); dillema, we cannot maximize it easily according decision rule. If this situation you can me optimization, but it requires more math; lineair programme. Only two products you can do it graphical (NOT EXAM). Market-based pricing; no/little differentation among product, price is determined by supply and demand, cost-leader usually sets the price, little price-setting discretion to firms. E.g. fuel, milk, vegetables.

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Cost-based pricing ; firms determine costs to produce and sell product, then identify and charge reasonable markup and adjust the markup as needed in response to market forces: increase profits by setting an initially high price for those willing to pay, followed by lower prices for the cost- conscious customer. - Full cost pricing; Advantages : + Firm can recover all it’s cost (all variable and fixed and make profit). Disadvantages : -“ Death spiral ” = The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher per unit allocated costs, fewer units might be sold. With fewer unit sales and no reduction in overhead costs, the remaining
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