Falsetta Corporation Makes Three Products That Use the Current Constraint

question 101

Essay

Falsetta Corporation makes three products that use the current constraint, which is a particular type of machine.Data concerning those products appear below: Required:
a.Rank the products in order of their current profitability from the most profitable to the least profitable.In other words, rank the products in the order in which they should be emphasized.Show your work!
b.Assume that sufficient constraint time is available 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 the constrained resource?

---

Definitions:

Payables-To-Sales Ratio

A financial metric that analyzes the relationship between a company's total payables and its total sales.

Net Operating Working Capital

A financial metric that highlights a firm's operational liquidity by subtracting current liabilities (excluding short-term debt) from current assets.

Current Ratio

A financial metric quantifying a firm's capability to fulfill its short-term liabilities with its present assets.

Aging Schedule

Breaks down accounts receivable according to how long they have been outstanding. This gives the firm a more complete picture of the structure of accounts receivable than that provided by days’ sales outstanding.