Exercise 5C: Utility of a restricted resource The School Pack company manufactures bags for school with a very resistant plastic bottom. It has three models that are the best sellers. The following table gives you information about these models.

	Mod A	Mod B	Mod C
Price Per Unit	$110	$150	$87.50
Variable Cost Per Unit	$30	$60	$27.50
Processing time in the plastic machine for each unit	3 mins	4 mins	1 min
Quantity of Plastic per unit ( in pounds)	4 lbs	5 lbs	3 lbs

The constrained resource is the processing time on the machine.

1. Determine the model with the highest and the lowest performance in the use of processing time as a constrained resource.

2. Determine the highest and lowest performing pattern in the use of plastic if this is the constrained resource.

3. Determine the model that has the highest contribution margin. Did this model turn out to be the top performer in the answers above? If it wasn't, explain why.

Exercise 5D: Recovery period (Payback period)A company that sells solid lumber for the manufacture of wood cabinets and furniture is considering investing in a wood-forming machine that will produce the following cash flows in the next few years. The investment will be made in two years as indicated below.

Year	Investent	Cash Flow
1	$28,500	$1,500
2	$6,000	$3,000
3		$6,000
4		$6,750
5		$9,000
6		$7,500
7		$6,000
8		$4,500
9		$3,750
10		$3,750

1. Determine the payback period of the investment.

2. Indicates if this method is an adequate tool to determine if the company should make the investment or not and why.