The Constrained Resource at Calabria Corporation Is a Key Raw

question 14

Essay

The constrained resource at Calabria Corporation is a key raw material.A total of 9,900 ounces of the constrained resource are available.Data concerning the company's two products follow: Product S28 requires 2 ounces of the constrained resource;product M16 requires 13 ounces.
Required:
a.Which product is most profitable,given the company's constraint?
b.How much of each product should be produced?
c.What is the total contribution margin if your plan in part (b)above is followed?

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Definitions:

Capital Budgeting

Capital budgeting is the process by which a business evaluates and selects significant long-term investments, based on potential returns and strategic objectives.

Net Acquisition

When there is a purchase and sale of assets (within the same asset class) in the same year, CCA is calculated on the capital cost of the new asset minus the lesser of the original capital cost or the net proceeds from the asset disposed.

Half-year Rule

The half-year rule is a tax regulation that allows only half the year's depreciation expense on newly acquired assets to be deducted in the first year.

Asset Class

A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations.