Question
A plant has one binding bottleneck: a heat-treating oven
(hours limited). Product P and Q both consume oven time; material is the only truly variable cost in the short run. P has higher gross margin per unit, but lower throughput per bottleneck hour than Q. Demand for both exceeds capacity; fixed costs are committed. Which production plan maximizes short-run profit?Solution
In throughput accounting with a single binding bottleneck, rank products by throughput per bottleneck hour (sales – truly variable costs per hour). With excess demand and fixed costs committed, prioritize Q if it yields higher throughput per constrained hour.
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