Banner Company produces three products: A, B, and C. The selling price, variable

Question

Banner Company produces three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow Product Selling price $ 90 $ 150 $ 170 Variable costs: Direct materials Direct labor Variable manufacturing overhead 50.50 10.00 2.50 66.25 25.00 6.25 105.35 15.00 3.75 63.00 124.10 Total variable cost Contribution margin Contribution margin ratio 97.50 $27.00 $52.50 $ 45.90 WY 35% 27% Due to a strike in the plant of one of its competitors, demand for the company's products far exceeds its capacity to produce. Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labor rate is $5 per hour, and only 3,940 hours of labor time are available each week.

Explanation / Answer

1 contribution margin per labour hour=

A=27/2=13.2(TOTTAL LABOUR HOUR rs10 and hourly rate5 so hour worked=10/5=2)

B=52.50/5=10.5(tOTTAL LABOUR HOUR rs25 and hourly rate5 so hour worked=25/5=5)

c=45.90/3=15.3(tOTTAL LABOUR HOUR rs15 and hourly rate5 so hour worked=15/5=3)

2 rercomended product for next week is product c

3 $2

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