Redshaw Corporation has provided the following data concerning its two products: $\begin{array}{lrr}
&\text { N43J } &{\text { I39F }} \
\text { Selling price }&\$ 288.00 & \$ 105.00 \
\text { Unit variable cost. }&\$ 172.80 & \$ 94.50 \
\text { Amount of the constrained resource required for }& \
\text { one unit of the product (ounces) }&16 & 15 \
\text { Monthly unit demand }&5,100 & 8,400
\end{array}$ The profitability index for product N43J is closest to:
A)0.87
B)0.40
C)$18.00 per ounce
D)$7.20 per ounce

Question

Quizplus · Accepted Answer

The profitability index is calculated as the contribution margin per unit divided by the amount of the constrained resource required per unit. For N43J, the contribution margin is $288.00 - $172.80 = $115.20. The constrained resource required is 16 ounces. Thus, the profitability index is $115.20 / 16 = $7.20 per ounce.

Redshaw Corporation Has Provided the Following Data Concerning Its Two