Wright, Inc. produces three products. Data concerning the selling prices and uni

Question

Wright, 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 tapping machine is the constraint, with only 2,500 minutes of tapping machine time available this week. Required: Calculate the contribution margin per minute for all three products. Given the tapping machine constraint, which product should be emphasized? Support your answer with appropriate calculations. Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of tapping machine time?

Explanation / Answer

Solution:

1.

2.

b.

Product C D E Selling Price 75 55 85 Less: Variable cost 50 40 55 Contribution 25 15 30 Tapping machine minutes 10 5 5 Contribution per minute 2.5 3 6

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