Contribution per Unit of Constrained Resource

(per unit) WLRM BB

Target Price 100 50
Material Cost 60 15
Contribution Margin 40 35
Cont/DLH* 200 175
Cont/SUH** 160 700
Cont/MH*** 11 23

* WLRM: $40 / 0.2 labour hrs BB: $35 / 0.2 labour hrs
** WLRM: $40 / ( 2 setup hrs / 8 units move) BB: $35 / ( 2 setup hrs / 40 units move)
*** WLRM: $40 / 3.5 machine hrs BB: $35 / 1.5 machine hrs
 Profit Results for Each Alternative

Option Units Produced Profit

WLRM BB
1 7500 0 300000
2 10000 0 140000
3 0 20000 580000
4 7500 20000 680000
5 10000 20000 695000
6 7500 0 300000
7 4000 20000 740000
8 8571 20000 662857
 Alternative 1

Incremental Revenue (target $100/unit) 750000

Incremental Fixed Costs (target $75/unit)
Overhead 0
Labour 0
Materials 450000
Total ($60/unit) -450000
Incremental Profit 300000
Target Profit Margin 25%
Actual Profit Margin 40%
 Alternative 2

Incremental Revenue (target $100/unit) 1000000

Incremental Fixed Costs (target $75/unit)
Equipment Setup* 200000
Labour** 60000
Materials 600000
Total ($86/unit) -860000
Incremental Profit 140000
Target Profit Margin 25%
Actual Profit Margin 14%

*625 additional setup hours required

**500 additional labour hours required
 Alternative 3

Incremental Revenue (target $50/unit) 1000000

Incremental Fixed Costs (target $15/unit)
Labour* 120000
Materials 300000
Total ($21/unit) -420000
Incremental Profit 580000
Target Profit Margin 25%
Actual Profit Margin 58%

*2500 additional labour hours required

 Alternative 4

WLRM BB Total
Incremental Revenue 750000 1000000 1750000
Incremental Material Cost -450000 -300000 -750000
Contribution Margin 300000 700000 1000000
Incremental Other Costs
Equipment Setup* 200000
Labour*** 120000
Total -320000
Incremental Profit 680000

*875 additional setup hours required

**4000 additional labour hours required
 Alternative 5

WLRM BB Total
Incremental Revenue 1000000 1000000 2000000
Incremental Material Cost -600000 -300000 -900000
Contribution Margin 400000 700000 1100000
Incremental Other Costs
Equipment Setup* 200000
Product Machining** 25000
Labour*** 180000
Total -405000
Incremental Profit 695000

*1500 additional setup hours required

**5000 additional machine hours required
***4500 additional labour hours required
 Alternative 7 (Machine Hours as Constraint)

WLRM BB Total
Incremental Revenue 857100 1000000 1857100
Incremental Material Cost -514260 -300000 -814260
Contribution Margin 342840 700000 1042840
Incremental Other Costs
Equipment Setup* 200000
Labour** 180000
Total -380000
Incremental Profit 662840

*1144 additional setup hours required

**4214 additional labour hours required
 Alternative 8 (Setup Hours as Constraint)

WLRM BB Total
Incremental Revenue 400000 1000000 1400000
Incremental Material Cost -240000 -300000 -540000
Contribution Margin 160000 700000 860000
Incremental Other Costs
Labour* 120000
Total -120000
Incremental Profit 740000

*3300 additional labour hours required