Benoit Company produces three products—A, B, and C. Data concerning the three pr
ID: 2511421 • Letter: B
Question
Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):
Product
90.00
The company estimates that it can sell 900 units of each product per month. The same raw material is used in each product. The material costs $4 per pound with a maximum of 5,400 pounds available each month.
Required:
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third?
3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 5,400 pounds of materials?
-What I really need is the third question. I have the first two. Thank you.
Product
A B C Selling price $90.00
$ 57.00 $ 80.00 Variable expenses: Direct materials 28.80 18.00 8.00 Other variable expenses 28.80 21.90 48.00 Total variable expenses 57.60 39.90 56.00 Contribution margin $ 32.40 $ 17.10 $ 24.00 Contribution margin ratio 36 % 30 % 30 %Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Product A Product B Product C Selling price 90.00 57.00 80.00 Variable expenses : Direct Materials 28.80 18.00 8.00 Other variable expenses 28.80 21.90 48.00 Total Variable expenses 57.60 39.90 56.00 Contribution Margin 32.40 17.10 24.00 Material cost per pound 4.00 4.00 4.00 Pound of materials used = Dm/4 7.20 4.50 2.00 contribution margin per pound = 4.50 3.80 12.00 Ranking 2.00 3.00 1.00 Total pounds available 5,400.00 Used for C = 900*2 1,800.00 Pounds available after C 3,600.00 Units of A = 3600/7.20 500.00 maximum contribution margin = 900 * 24 + 500*32.40 37,800.00
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