Calculate the maximum price the company should be prepared to pay in total for the additional material.
Calculate the maximum price the company should be prepared to pay in total for the additional material.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A company produce two products from a single ingredient that normally costs £1 per kg and is in scarce supply
Product data are Product 1 Product 2
Maximum demand (units) 2800 1000
Optimum planned production (units) 2800 500
Contribution per unit 6.00 9.00
Raw material used (kg) 3 5
The unit contribution figures are calculated after charging material cost at £1 per kg.
An additional source for the ingredient has been located with 2,000kg available.
Calculate the maximum price the company should be prepared to pay in total for the additional material.
A. 3600
B. 4000
C. 5600
D. 6000
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