Hamelinck Corporation would like to determine the relative profitability of a number of jobs. For example, the revenue from Job W06Z is $77,000 and its avoidable costs amount to $69,300, resulting in an incremental profit of $7,700. Furthermore, the job requires 220 hours of the constrained resource. What is the profitability index for job W06Z?
A)$315 per hour
B)$35 per hour
C)$350 per hour
D)0.10

Question

Quizplus · Accepted Answer

The profitability index is calculated by dividing the incremental profit by the number of hours of the constrained resource required. For Job W06Z, this is $7,700 / 220 hours = $35 per hour.

Hamelinck Corporation Would Like to Determine the Relative Profitability of a Number