Answer (C) is correct . Under a theory of constraints analysis, the product with the greatest absolute throughput margin is not of the highest interest. Bottlenecks hold up production, so no matter how great the margin on a product is, if it cannot get through the production process, it cannot earn that margin. The relevant figure is throughput margin per time spent in the constraint. Throughput costing recognizes only direct materials costs as being truly variable and thus relevant to the calculation of throughput margin. In Bombastic’s case, the most profitable product using this metric is the nickel fixture ($180 ÷ 4 hours = $45).
Answer (A) is incorrect because The throughput margin per time spent in the constraint for the brass fixture is only $37.50 ($150 ¡Â 4 hours).
Answer (B) is incorrect because The throughput margin per time spent in the constraint for the chrome fixture is only $26 ($130 ¡Â 5 hours).
Answer (D) is incorrect because The throughput margin per time spent in the constraint for the aluminum fixture is only $31.67 ($190 ¡Â 6 hours).< |
