Texts: Nike Inc. makes running shoes. Data concerning three of the company's most popular shoes appear below:
Trail 513 - selling price per pair $175.00, variable cost per pair $52.50, processing time required to make one pair 3 minutes, amount of carbon rubber usage in each pair 2.5 pounds.
Trainer 230 - selling price per pair $140.00, variable cost per pair $63.00, processing time required to make one pair 1 minute, amount of carbon rubber usage in each pair 2.0 pounds.
Racer 155 - selling price per pair $255.00, variable cost per pair $43.35, processing time required to make one pair 4 minutes, amount of carbon rubber usage in each pair 0.75 pounds.
1. If we assume the processing time is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product? (CM of processing time)
1a. Since processing time is a constrained resource, which model should the company produce based strictly on contribution margin? (Model)
2. If we assume that a severe shortage of carbon rubber has required the company to cut production of its sneakers, what is the contribution margin per pound of carbon rubber for each product? (CM of carbon rubber)
2a. Since carbon rubber is a constrained resource, which model should the company produce based strictly on contribution margin? (Model)