Professional Documents
Culture Documents
5.4.b Answer To Examples P and Q
5.4.b Answer To Examples P and Q
P Q
Price $ 90.00 $ 100.00
Variable Cost $ 45.00 $ 40.00 It seems like Q is the better product
Profit $ 45.00 $ 60.00
We then supply all demand for Q and use the remaining capacity to produce P
Sales:
50 Q-Units $ 5,000.00 B is the bottleneck
60 P-Units $ 5,400.00 Q consumes 30 minutes of B per unit
Total Sales $10,400.00 50 Q-Units consume 1,500 minutes
This results in 900 minutes remaining
Cost of Material P consumes 15 minutes of B per unit
For 50 Q-Units $ 2,000.00 This results in a remaining capacity for 60 P-Units
For 60 P-Units $ 2,700.00
Total Cost of Material $ 4,700.00
Let's try doing the exact opposite exercise, even though it may sound illogical:
We will supply all demand for P and use the remaining capacity to produce Q
Sales:
100 P-Units $ 9,000.00 B is the bottleneck
30 Q-Units $ 3,000.00 P consumes 15 minutes of B per unit
Total Sales $12,000.00 100 P-Units consume 1,500 minutes
This results in 900 minutes remaining
Cost of Material Q consumes 30 minutes of B per unit
For 100 P-Units $ 4,500.00 This results in a remaining capacity for 30 Q-Units
For 30 Q-Units $ 1,200.00
Total Cost of Material $ 5,700.00