Ignoring the machine time constraint, what strategy would appear optimal?  What is the contribution margin per unit of limited resource for each type of bearing?  If additional machine time could be obtained, how should the additional capacity be used?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Durham Corporation in Illinois, U.S. manufactures and sells three different types of high-quality sealed ball bearings for mountain bike wheels. The bearings vary in terms of their quality specifications—primarily with respect to their smoothness and roundness. They are referred to as Fine, Extra-Fine, and Super-Fine bearings. Machine time is limited. More machine time is required to manufacture the Extra-Fine and Super-Fine bearings. Additional information is provided below.(Currency unit: U.S. Dollars, $)    

                                                   Product

  Fine Extra-fine super-fine
Selling price 6.00$ 10.00$ 16.00$
Variable costs and expenses  4.00 6.50 11.00
Contribution margin  2.00$ 3.50$ 5.00$
Machine hours required 0.02 0.04 0.08

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  1. Ignoring the machine time constraint, what strategy would appear optimal? 
  2. What is the contribution margin per unit of limited resource for each type of bearing? 
  3. If additional machine time could be obtained, how should the additional capacity be used? 
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