Benoit Company produces three products, A, B, and C. Data concerning the three p
ID: 2398816 • Letter: B
Question
Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit):
Product
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 $6 per pound with a maximum of 6,000 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.)
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 B C Selling price $ 65 $ 45 $ 55 Variable expenses: Direct materials 19.50 13.50 3.85 Other variable expenses 19.50 20.25 34.65 Total variable expenses 39.00 33.75 38.50 Contribution margin $ 26.00 $ 11.25 $ 16.50 Contribution margin ratio 40 % 25 % 30 %Explanation / Answer
(1) Contribution Margin per Pound of material used :-
Product
Contribution Margin pu
(D)
DM cost pu
(A)
DM cost per pound
(B)
DM pound used pu
(C = A/B)
Contribution Margin per Pound
(D/C)
A
26
19.50
6
3.25
8
B
11.25
13.50
6
2.25
5
C
16.50
3.85
6
0.64
25.78
(2) Statement of Order/Ranking :-
Product
Contribution Margin per Pound
Ranking
A
8
2nd
B
5
3rd
C
25.78
1st
Product
Contribution Margin pu
(D)
DM cost pu
(A)
DM cost per pound
(B)
DM pound used pu
(C = A/B)
Contribution Margin per Pound
(D/C)
A
26
19.50
6
3.25
8
B
11.25
13.50
6
2.25
5
C
16.50
3.85
6
0.64
25.78
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