Redner, Inc

question 126

Essay

Redner, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Fixed costs are applied to the products on the basis of direct labor hours.
Demand for the three products exceeds the company's productive capacity. The grinding machine is the constraint, with only 2,400 minutes of grinding machine time available this week.
Required:
a. Given the grinding machine constraint, which product should be emphasized? Support your answer with appropriate calculations.
b. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of grinding machine time?

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Definitions:

Productivity

A measure of the efficiency of production, often calculated as the ratio of outputs produced to inputs used in the production process.

Capital

Financial assets or the financial value of assets, such as cash and goods, used to generate wealth through investment.

Labor

Labor refers to the human effort, both physical and mental, used to produce goods and services.

Close Substitutes

Goods or services that can be used in place of each other with relative ease by consumers, based on similar features, functions, or effects.