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A company produces three products. Data concerning the selling prices and unit costs of the three products appear below:

A B C
Selling price $40 $50 $90
Variable Costs 30 40 60
Machine Time 4 min 5 min 10 min

The fixed costs incurred in the factory are $100,000 per year. Demand for the three products exceed the company's productive capacity. The machine time is the constraint, with only 3,000 minutes of machine time available this week.

1. Given the machine time constraint, which product would be emphasized?
2. Assuming there is still unfilled demand for the product that the company should emphasize in part 1. above, up to how much should the company be willing to pay for an additional hour of machine time?

 

Basic Finance, Finance

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