Utilization of a Constrained Resource: > When a limited resource of some type restricts the companys ability to satisfy demand, the company is said to have a constraint. > the machine or process that is limiting overall output is called the bottleneck it is the constraint. Contribution Margin in Relation to a Constrained Resource > When a constraint exists, a company should select a product mix that maximizes the total contribution margin earned since xed costs usually remain unchanged. > A company should not necessarily promote those products that have the highest unit contribution margin. > Rather, it should promote those products that earn the highest contribution margin in relation to the constraining resource. Contribution Margin in Relation to a Constrained Resource Example > Machine A1 is the constrained resource and is being used at 100 of its capacity. > There is excess capacity on all other machines. > Machine A1 has a capacity of 2,400 minutes per week. Should Ensign focus its efforts on Product 1 or Product 2?