Fontana Corporation's two products have the following characteristics: The constrained resource is a particular machine that is available for 9,800 minutes each month. Each unit of product S83E requires 16 minutes on this machine and each unit of product G29P requires 5 minutes on this machine.
-Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A) $3.20 per minute
B) $2.40 per minute
C) $16.00 per minute
D) $38.40 per minute

Question

Fontana Corporation's two products have the following characteristics:  The constrained resource is a particular machine that is available for 9,800 minutes each month. Each unit of product S83E requires 16 minutes on this machine and each unit of product G29P requires 5 minutes on this machine.
-Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A) $3.20 per minute 
B) $2.40 per minute 
C) $16.00 per minute 
D) $38.40 per minute

Quizplus · Accepted Answer

To calculate the cost of the constrained resource, we need to determine the total minutes required for each product and add them up. 
For product S83E: 16 minutes/unit x 870 units = 13,920 minutes 
For product G29P: 5 minutes/unit x 1,200 units = 6,000 minutes 
Total minutes required = 13,920 + 6,000 = 19,920 minutes 
Since the machine is available for 9,800 minutes each month, the company needs to obtain an additional 10,120 minutes. 
Therefore, the company should be willing to pay up to 10,120 minutes x cost per minute. 
$2.40 per minute x 10,120 minutes = $24,288 
Thus, the company should be willing to pay up to $2.40 per minute to obtain enough of the constrained resource to satisfy demand for the two existing products.

Fontana Corporation's Two Products Have the Following Characteristics: the Constrained