Asked by Lehia Coloma on May 20, 2024
Verified
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product.Up to how much should the company be willing to pay to acquire more of this constrained resource?
A) $15.60 per minute
B) $13.10 per minute
C) $104.52 per unit
D) $27.36 per unit
Constrained Resource
A resource within a manufacturing or production process that limits the overall output due to its limited capacity.
Profitable Product
A product that generates more revenue than the costs associated with its production, marketing, and distribution.
Sufficient Time
Proper or adequate amount of time needed to complete a task or process.
- Evaluate the optimal investment a firm should be prepared to make for the acquisition of further quantities of a restricted resource.
Verified Answer
MA
Monic amoreMay 24, 2024
Final Answer :
B
Explanation : 
The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $13.10 per minute for VD.
Reference: CH11-Ref24
The Carter Corporation makes products A and B in a joint process from a single input, R.During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point.Joint production costs total $90,000 per production run.The unit selling price for A is $4.00 and for B is $3.80 at the split-off point.However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit.
The company should be willing to pay up to the contribution margin per minute for the marginal job, which is $13.10 per minute for VD.Reference: CH11-Ref24
The Carter Corporation makes products A and B in a joint process from a single input, R.During a typical production run, 50,000 units of R yield 20,000 units of A and 30,000 units of B at the split-off point.Joint production costs total $90,000 per production run.The unit selling price for A is $4.00 and for B is $3.80 at the split-off point.However, B can be processed further at a total cost of $60,000 and then sold for $7.00 per unit.
Learning Objectives
- Evaluate the optimal investment a firm should be prepared to make for the acquisition of further quantities of a restricted resource.