Dombrowski Corporation would like to determine the relative profitability of the company's products for purposes of making volume trade-off decisions. For example, the selling price of product V48Q is $150.00, its unit variable cost is $135.00, and its unit contribution margin is $15.00. One unit of the product requires 6 minutes of the constrained resource. Monthly sales are 5,800 units. What is the profitability index for product V48Q?
A) $2.50 per minute
B) 0.10
C) $25.00 per minute
D) $87,000

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the unit contribution margin by the time required for one unit of the constrained resource. For product V48Q, it is $15.00 / 6 minutes = $2.50 per minute.

Dombrowski Corporation Would Like to Determine the Relative Profitability of the Company's