The same constrained resource is used by four different products at Rodrigez Corporation.Data concerning those products appear below: The company does not have enough of the constrained resource to satisfy for demand of all four products.From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?
A)Z300
B)Z400
C)Z200
D)Z100

Question

The same constrained resource is used by four different products at Rodrigez Corporation.Data concerning those products appear below:  The company does not have enough of the constrained resource to satisfy for demand of all four products.From the standpoint of the entire company, if it is a choice between sales of one unit of one product versus another, which product should the salespersons emphasize?
A)Z300 
B)Z400 
C)Z200 
D)Z100

Quizplus · Accepted Answer

In order to determine which product to emphasize, we need to calculate the contribution margin per unit of the constrained resource for each product.

Contribution margin per unit of constrained resource:

Z100: $4 / 0.5 hour = $8 per hour of constrained resource 
Z200: $3 / 0.3 hour = $10 per hour of constrained resource 
Z300: $7 / 0.8 hour = $8.75 per hour of constrained resource 
Z400: $5 / 0.6 hour = $8.33 per hour of constrained resource

Based on the above calculations, Z200 has the highest contribution margin per hour of constrained resource. Therefore, the salespersons should emphasize the sales of Z200 over the other products.

The Same Constrained Resource Is Used by Four Different Products