Benoit Company produces three products-A, B, and C. Data concerning the three products follow (per unit): Product А B $84.00 $66.00 $74.00 Selling price Variable expenses: Direct materials 25.20 18.00 9.00 Other variable expenses Total variable expenses 25.20 31.50 42.80 50.40 49.50 51.80 $33.60 $16.50 $22.20 Contribution margin Contribution margin ratio 40% 25% 30% The company estimates that it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $3 per pound with a maximum of 5,700 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 that the company can earn per month if it makes optimal use of its 5,700 pounds of materials?
Benoit Company produces three products-A, B, and C. Data concerning the three products follow (per unit): Product А B $84.00 $66.00 $74.00 Selling price Variable expenses: Direct materials 25.20 18.00 9.00 Other variable expenses Total variable expenses 25.20 31.50 42.80 50.40 49.50 51.80 $33.60 $16.50 $22.20 Contribution margin Contribution margin ratio 40% 25% 30% The company estimates that it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $3 per pound with a maximum of 5,700 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 that the company can earn per month if it makes optimal use of its 5,700 pounds of materials?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 28BEB: Quality Cost Report Loring Company had total sales of 2,400,000 for fiscal 20X1. The costs of...
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