Fictional constrained production
A fictional workshop has 100 available machine hours for a short planning period. Product A sells for 50 currency units and has variable cost 30 per unit, using two machine hours. Product B sells for 40 and has variable cost 25 per unit, using one machine hour. Demand in this simplified scenario is sufficient for either product, fixed costs do not change, and no other bottleneck applies. A manager favors A because its contribution per unit is larger. Another proposes allocating historical head-office charges to decide the order. The exercise asks for a conditional allocation, not a real production instruction. After the calculation, the team must identify what would change if demand for B were limited, overtime introduced a new cost or quality requirements reduced usable capacity.
1. Which product should receive scarce time first in this model?
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A contributes 20 per unit and 10 per machine hour. B contributes 15 per unit and 15 per machine hour. B has the larger contribution per scarce hour under the supplied assumptions.
2. What needs checking before applying the result?
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Confirm demand, actual incremental costs, usable capacity and other constraints. Historical allocated overhead does not automatically change with this short-term choice.