Mccraig Corporation would like to determine the relative profitability of a number of jobs. For example, job S35A has revenues of $52,000 and avoidable costs of $36,400, resulting in an incremental profit of $15,600. The job requires 260 hours of the constrained resource. The job is responsible for 8% of the company's total profit for the period. What is the profitability index for job S35A?
A) $60 per hour
B) $200 per hour
C) 0.30
D) 0.08

Question

Quizplus · Accepted Answer

The profitability index is calculated as incremental profit divided by the hours of constrained resource required. For job S35A, it is $15,600 / 260 hours = $60 per hour.

Mccraig Corporation Would Like to Determine the Relative Profitability of a Number