Question

Holden Corporation produces three products, with costs and selling prices as follows: Product A Product B Product C Selling price per unit $ 30 100 % $ 20 100 % $ 15 100 % Variable costs per unit 18 60 % 15 75 % 6 40 % Contribution margin per unit $ 12 40 % $ 5 25 % $ 9 60 % A particular machine is the bottleneck. On that machine, 3 machine hours are required to produce each unit of Product A, 1 hour is required to produce each unit of Product B, and 2 hours are required to produce each unit of Product C. Rank the products from the most profitable to the least profitable use of the constrained resource (bottleneck)

Answer 1

Product B $ 5.00 per hour

Product C $ 4.50 per hour

Product A $ 4.00 per hour

Step-by-step explanation:

`\left[\begin{array}{cccc}&A&B&C&Sales&30&20&15&Variable&-18&-15&-6&CM&12&5&9&Constrain \:resource&3&1&2&CM \: per \:constrain&4&5&4.5&\end{array}\right]`

FIorst we calculate the CM per product

then we divide this CM by the consumption on the bottleneck resource.