The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:
-Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product.Up to how much should the company be willing to pay to acquire more of this constrained resource?
A)$12.50 per minute
B)$29.96 per unit
C)$10.70 per minute
D)$71.92 per unit

Question

The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: 
-Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product.Up to how much should the company be willing to pay to acquire more of this constrained resource?
A)$12.50 per minute 
B)$29.96 per unit 
C)$10.70 per minute 
D)$71.92 per unit

Quizplus · Accepted Answer

The company should be willing to pay up to the contribution margin per minute (or per unit) of the least profitable product, as long as the contribution margin is greater than the cost of acquiring more of the constrained resource.

From the table given, we can see that the least profitable product is Product A, which has a contribution margin of $3.30 per unit. Since there is sufficient time available to satisfy demand for all but the least profitable product, we can assume that the cost of acquiring more of the constrained resource (in this case, machine time) would be equal to the contribution margin of Product A.

Therefore, the company should be willing to pay up to $3.30 per minute (if the resource is priced on a per minute basis) or $3.30 per unit (if the resource is priced on a per unit basis) to acquire more of the constrained resource.

Among the given answer choices, the closest to $3.30 per minute is $10.70 per minute (choice C), which is the answer.

The Constraint at Dalbey Corporation Is Time on a Particular