Calgary Company manufactures three products-X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product follow: Selling price Variable expenses: X $200 40 120 Y $300 160 $40 20% 100 110 210 $90 30% Z $250 50 135 Direct materials Other variable expenses 185 Total variable expenses Contribution margin $65 Contribution margin ratio 26% The same raw material is used in all three products. Calgary Company has only 8,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $10 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assuming that Calgary has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 8,000 pounds of raw material on hand? Assuming that Calgary's estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 8,000 pounds of raw material on hand? 3. 4. A foreign supplier could furnish Calgary with additional stocks of the raw material at a substantial premium over the usual price. Assuming Calgary's estimated customer demand is 500 units per product line and that the company has used its 8,000 pounds of raw material in an optimal fashion, what is the highest price Calgary Company should be willing to pay for an additional pous], [LO6] materials?
Calgary Company manufactures three products-X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product follow: Selling price Variable expenses: X $200 40 120 Y $300 160 $40 20% 100 110 210 $90 30% Z $250 50 135 Direct materials Other variable expenses 185 Total variable expenses Contribution margin $65 Contribution margin ratio 26% The same raw material is used in all three products. Calgary Company has only 8,000 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $10 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assuming that Calgary has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 8,000 pounds of raw material on hand? Assuming that Calgary's estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 8,000 pounds of raw material on hand? 3. 4. A foreign supplier could furnish Calgary with additional stocks of the raw material at a substantial premium over the usual price. Assuming Calgary's estimated customer demand is 500 units per product line and that the company has used its 8,000 pounds of raw material in an optimal fashion, what is the highest price Calgary Company should be willing to pay for an additional pous], [LO6] materials?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
100%
![Calgary Company manufactures three products-X, Y, and Z. The selling price, variable costs, and
contribution margin for one unit of each product follow:
Selling price
Variable expenses:
X
$200
40
120
Product
Y
$300
160
$40
20%
100
110
Z
$250
210
$90
30%
Direct materials
Other variable expenses
185
Total variable expenses
Contribution margin
$65
Contribution margin ratio
26%
The same raw material is used in all three products. Calgary Company has only 8,000 pounds of raw
material on hand and will not be able to obtain any more of it for several weeks due to a strike in its
supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its
backlog of orders. The material costs $10 per pound.
Required:
50
135
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Assuming that Calgary has unlimited demand for each of its three products, what is the maximum
contribution margin the company can earn when using the 8,000 pounds of raw material on hand?
Assuming that Calgary's estimated customer demand is 500 units per product line, what is the
maximum contribution margin the company can earn when using the 8,000 pounds of raw material on
hand?
3.
4. A foreign supplier could furnish Calgary with additional stocks of the raw material at a substantial
premium over the usual price. Assuming Calgary's estimated customer demand is 500 units per
product line and that the company has used its 8,000 pounds of raw material in an optimal fashion,
what is the highest price Calgary Company should be willing to pay for an additional pous], [LO6]
materials?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5fd0f115-34b3-4afa-92a7-7710b5ea2533%2F6e500f2e-4919-493a-93a9-0de2cb684372%2F3xk2kcc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Calgary Company manufactures three products-X, Y, and Z. The selling price, variable costs, and
contribution margin for one unit of each product follow:
Selling price
Variable expenses:
X
$200
40
120
Product
Y
$300
160
$40
20%
100
110
Z
$250
210
$90
30%
Direct materials
Other variable expenses
185
Total variable expenses
Contribution margin
$65
Contribution margin ratio
26%
The same raw material is used in all three products. Calgary Company has only 8,000 pounds of raw
material on hand and will not be able to obtain any more of it for several weeks due to a strike in its
supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its
backlog of orders. The material costs $10 per pound.
Required:
50
135
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Assuming that Calgary has unlimited demand for each of its three products, what is the maximum
contribution margin the company can earn when using the 8,000 pounds of raw material on hand?
Assuming that Calgary's estimated customer demand is 500 units per product line, what is the
maximum contribution margin the company can earn when using the 8,000 pounds of raw material on
hand?
3.
4. A foreign supplier could furnish Calgary with additional stocks of the raw material at a substantial
premium over the usual price. Assuming Calgary's estimated customer demand is 500 units per
product line and that the company has used its 8,000 pounds of raw material in an optimal fashion,
what is the highest price Calgary Company should be willing to pay for an additional pous], [LO6]
materials?
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