Redner,Inc

question 47

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?

---

Definitions:

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to assess the relative value of currencies.

Nominal Exchange Rate

How quickly one currency is swapped for another, without considering inflation adjustments.

Big Mac

A hamburger sold by McDonald's that is often used as an informal measure of purchasing power parity between currencies.

Depreciates

The decrease in value of an asset over time or in response to changes in market conditions.