Up to how much should the company be willing to pay to obtain enough of the constrained resource to satisfy demand for the two existing products?
A)$52.80 per minute
B)$25.00 per minute
C)$3.30 per minute
D)$5.00 per minute

Question

Quizplus · Accepted Answer

The company should be willing to pay up to the contribution margin per minute of the product with the lower contribution margin. In this case, that would be Product B with a contribution margin of $3.30. Therefore, the company should be willing to pay up to $3.30 per minute for the constrained resource to satisfy demand for both products. Option C is the only answer choice that falls within this range.

Up to How Much Should the Company Be Willing to Pay