2:10 PM connect.mheducation.com Pad *70% Benoit Company produces three products,

Question

2:10 PM connect.mheducation.com Pad *70% Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Product S75 S 55 S 65 Selling price Variable expenses: Direct materials 22.50 16.50 Other variable expenses Total variable expenses Contribution margin 4.55 22.50 24.75 40.95 45.00 4125 45.50 $30.00 $13.75 $19.50 40% 25% 30% Contribution margin ratio 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 4,200 pounds available each month. Required: 1. Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal places.) Product A Product B Product C 4.50 3.30 0.91 2. Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third? Product A Product B Product C First Second Third

Explanation / Answer

Req 1: CONTRIBUTION MARGIN PER POUND OF MATERIAL PRODUCT A PRODUCT B PRODUCT C Material cost per unit 22.5 16.5 5 Material cost per pound 5 5 5 Pounds of material require per unit 4.5 3.3 1 Contribution margin per unit 30 13.75 19.5 Contribution margin per pound 6.67 4.17 19.5 (Contribution margin per unit/ Pounds per unit) Product A 6.67 Product B 4.17 Product C 19.5 Req 2: Ranking : Product A Second Product B Third Product C First

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