Shelby Company produces three products: product X, product Y, and product Z. Dat

Question

Shelby Company produces three products: product X, product Y, and product Z. Data concerning the three products follow (per unit): Demand for the company's products is very strong, with far more orders each month than the company can produce with the available raw materials. The same material is used in each product. The material costs $5 per pound, with a maximum of 4,300 pounds available each month Required: Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal places.) Which orders would you advise the company to accept first, those for product X, for product Y, or for product Z? Which orders second? Third?

Explanation / Answer

Particulars X Y Z Selling Price             65.00            45.00                     55.00 Direct Materials             19.50            13.50                       3.85 Labour & Overhead             19.50            20.25                     34.65 Total variable Cost             39.00            33.75                     38.50 Contribution Margin             26.00            11.25                     16.50 Cost of 1 pound               5.00               5.00                       5.00 Pounds reuqired               3.90               2.70                       0.77 Contribution per pound               6.67               4.17                     21.43 Contribution Margin per pound 10.26% 9.26% 38.96% Ranking based on Limiting Factor (Raw Materials) 2 3 1

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