Benoit Company produces three products-A, B, and C. Data concerning the three products follow (per unit): Selling price Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio A Product B C $ 85.00 $ 60.00 $ 82.00 27.20 15.00 8.00 27.20 33.00 53.50 54.40 $ 30.60 36% 48.00 $ 12.00 61.50 20% $ 20.50 25% The company estimates it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $4 per pound with a maximum of 5,100 pounds available each month. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third? 3. What is the maximum contribution margin the company can earn per month if it makes optimal use of its 5,100 pounds of materials?
Benoit Company produces three products-A, B, and C. Data concerning the three products follow (per unit): Selling price Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio A Product B C $ 85.00 $ 60.00 $ 82.00 27.20 15.00 8.00 27.20 33.00 53.50 54.40 $ 30.60 36% 48.00 $ 12.00 61.50 20% $ 20.50 25% The company estimates it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $4 per pound with a maximum of 5,100 pounds available each month. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third? 3. What is the maximum contribution margin the company can earn per month if it makes optimal use of its 5,100 pounds of materials?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Benoit Company produces three products-A, B, and C. Data concerning the three products follow (per unit):
Selling price
Variable expenses:
Direct materials
Other variable expenses
Total variable expenses
Contribution margin
Contribution margin ratio
A
Product
B
C
$ 85.00
$ 60.00
$ 82.00
27.20
15.00
8.00
27.20
33.00
53.50
54.40
$ 30.60
36%
48.00
$ 12.00
20%
61.50
$ 20.50
25%
The company estimates it can sell 850 units of each product per month. The same raw material is used in each product. The material
costs $4 per pound with a maximum of 5,100 pounds available each month.
Required:
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third?
3. What is the maximum contribution margin the company can earn per month if it makes optimal use of its 5,100 pounds of materials?
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