Redshaw Corporation has provided the following data concerning its two products: $\begin{array}{c}
\begin{array}{llcc}
\
\text { Selling price............................................. } & \
\text { Unit variable cost..................................... } &\
\text {Amount of the constrained resource required for } &\
\text {one unit of the product (ounces)................ } &\
\text {Monthly unit demand................................ } &\
\end{array}
\begin{array}{rr}
\text { N43J } &\text { I39F } \
\$ 288.00 & \$ 105.00 \
\$ 172.80 & \$ 94.50 \
\
16 & 15 \
5,100 & 8,400
\end{array}
\end{array}$
The profitability index for product N43J is closest to:

Question

Redshaw Corporation has provided the following data concerning its two products: $\begin{array}{c}
\begin{array}{llcc}
\
  \text { Selling price............................................. } &  \
 \text { Unit variable cost..................................... } &\
 \text {Amount of the constrained resource required for   } &\
 \text {one unit of the product (ounces)................  } &\
 \text {Monthly unit demand................................  } &\
\end{array}
\begin{array}{rr}
\text { N43J } &\text { I39F } \
\$ 288.00 & \$ 105.00 \
\$ 172.80 & \$ 94.50 \
\
16 & 15 \
5,100 & 8,400
\end{array}
\end{array}$
 The profitability index for product N43J is closest to:

Quizplus · Accepted Answer

The profitability index is calculated as the contribution margin per unit divided by the amount of the constrained resource required per unit. For N43J, the contribution margin is $288.00 - $172.80 = $115.20. Dividing by 16 ounces gives $7.20 per ounce.

Redshaw Corporation Has Provided the Following Data Concerning Its Two