Exercise 10-12 Utilization of a Constrained Resource [LO10-5] Benoit Company pro

Question

Exercise 10-12 Utilization of a Constrained Resource [LO10-5] Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Product A B C Selling price $ 100 $ 80 $ 90 Variable expenses: Direct materials 30.00 24.00 6.30 Other variable expenses 30.00 36.00 56.70 Total variable expenses 60.00 60.00 63.00 Contribution margin $ 40.00 $ 20.00 $ 27.00 Contribution margin ratio 40 % 25 % 30 % 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 $4 per pound with a maximum of 4,700 pounds available each month. Required: a. Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal places.)

Explanation / Answer

Product A Product B Product C (1) Direct materials required per unit 30 24 6.3 (2) Cost per pound 4 4 4 (3) Pounds required per unit (1) ÷ (2) 7.5 6 1.58 (4) Contribution margin per unit 40 20 27 (5) Contribution margin per poundof materials used (4) ÷ (3) 5.33 3.33 17.09

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