Efficient utilization of a scarce resource
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The key to the efficient utilization of a scarce resource is the contribution margin per unit of the constraint resource. What does this statement mean? Provide examples in your discussion.
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This solution discusses the efficient utilization of a scarce resource.
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When a limited resource of some type restricts the company's ability to satisfy demand, the company is said to have a constraint (Brewer, Garrison, & Noreen, 2007, p. 469). "The machine or process that is limiting overall output is called the bottleneck - it is the constraint" (Brewer, Garrison, & Noreen, 2007, p. 470). Since the company cannot fully satisfy demand, managers must decide which products or services make the best use of the constrained resource (Brewer, Garrison, & Noreen, 2007, p. 469). The choices that managers make do not affect fixed costs and thus the cause of action that maximizes the company's total contribution margin must be selected.
The statement "The key ...
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