Example: Decision Making under Constrained Resources River Runners operates whitewater rafting on Wyoming's Snake River. The company offers half-day, full-day, and two-day excursions. Per unit revenue, variable costs and contribution margins for each of these are summarized: VER UNNERS Rate (revenue) Variable Costs Contribution margin Two-day Excursion $ 300 190 $ 110 Full-day Excursion 165 85 80 Half-day Excursion 85 35 50 The National Forest Service is concerned about protecting the river system from overuse To preserve the natural resource, the Service limits the number of rafts that may be on the river each season by selling allotments to competing rafting companies. River Runner's allotment for the summer 2012 season is 6,300 river hours. The three excursions use varying amounts of this allotment, as follows: . Two-day excursion 12 hours Full-day excursion 7 hours . Half-day excursion 5 hours If River Runners expects to use the full allotment during the summer season, regardless of which format, which of the three excursions should it promote? Summary: In the presence of constrained resources, companies should promote those services that yield the highest contribution margin, per unit of the constrained resource. Chapter 12, Page -9