Gordy, Inc. produces three products. Data concerning the selling prices and unit

Question

Gordy, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below: Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The grinding machine is the constraint, with only 2,800 minutes of grinding machine time available this week. Required: a-1. Calculate the contribution margin per minute for all three products. a-2. Given the grinding machine constraint, which product should be emphasized? Product J Product K Product L

Explanation / Answer

Particulars Product - J Product - K Product - L Selling Price - A 65 45 75 Variable Cost - B 30 20 35 Contribution Margin - C (A-B) 35 25 40 No of Granding Machine Time - D 10 5 5 Contribution Margin Per Minute ( C / D) 3.5 5 8 Rank III II I Question - 2 Among three products, Product - L gives the highest Contribution margin per granding machine So Product - L should be emphasized.

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