Yost-Perry Industries’ (YPI) senior management team wants to imp

Yost-Perry Industries’ (YPI) senior management team wants to improve the profitability of the firm by accepting the right set of orders. Currently, decisions are made using the traditional method, which is to accept as much of the highest contribution margin product as possible (up to the limit of its demand), followed by the next highest contribution margin product and so on until all available capacity is utilized. Because the firm cannot satisfy all the demand, the product mix must be chosen carefully. Jay Perry, the newly promoted production supervisor is knowledgeable about the theory of constraints and the bottleneck-based method for scheduling. He believes that profitability can indeed be improved if bottleneck resources are exploited to determine the product mix. What is the change in profits if instead of the traditional method that YPI has used thus far, the bottleneck method advocated by Jay is used for selecting the product mix?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...


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