Question

Marrin corporation makes three products that use the current constraint - a particular type of machine. Data Concerning these products appear below:

..........................................KZ...................XB....................ZP
Sell price/unit...........$511.28...........$286.70.......$142.60
Vcost/unit...............$392.59.............$286.70.....$108.79
Mins on constraint 8.3min..............6.1min.........2.3 min


Rank the products , in order of their current profitability from the most profitable to least

A) KZ, XB, ZP
B) ZP, KZ, XB
C)XB, ZP, KZ
D) KZ, ZP, XB

Answer 1

The profitability ranking based on contribution margin per minute of constraint machine use is ZP as the most profitable, followed by KZ, and XB as the least profitable, making the correct answer B) ZP, KZ, XB.

Step-by-step explanation:

To rank the products by profitability using the given constraint, we need to determine the contribution margin per unit of constraint for each product. The contribution margin is calculated by subtracting the variable cost from the selling price. Then, we divide the contribution margin by the minutes on the constraint machine to get the contribution margin per minute, which reflects the profitability per minute of machine use.

For KZ:
$511.28 (selling price) - $392.59 (variable cost) = $118.69 (contribution margin);
$118.69 / 8.3 minutes = $14.30 per minute.

For XB:
$286.70 (selling price) - $286.70 (variable cost) = $0.00 (contribution margin);
$0.00 / 6.1 minutes = $0.00 per minute.

For ZP:
$142.60 (selling price) - $108.79 (variable cost) = $33.81 (contribution margin);
$33.81 / 2.3 minutes = $14.70 per minute.

After calculating the contribution margin per minute, the profitability ranking from most to least profitable is:

1. ZP ($14.70 per minute)
2. KZ ($14.30 per minute)
3. XB ($0.00 per minute)

Therefore, the correct answer is B) ZP, KZ, XB.