The Constraint at Crumedy Inc

question 48

Essay

The constraint at Crumedy Inc. is an expensive milling machine. The three products listed below use this constrained resource.
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?

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Definitions:

Time and Materials Pricing

A pricing method where the customer is charged for the direct labor hours at a specific rate and the cost of materials used.

Total Price

Refers to the complete amount of money required to purchase a product or service, including all associated fees and taxes.

Materials Markup

The amount added to the cost price of materials to cover overhead and profit when pricing a product or service.

Direct Labor Rate

The wage rate paid to employees directly involved in manufacturing goods or providing services, expressed per hour or per unit of output.