Benoit Company produces three products—A, B, and C. Data concerning the three pr
ID: 2432694 • Letter: B
Question
Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):
Product
75.00
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 $3 per pound with a maximum of 5,400 pounds available each month.
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?
Product
A B C Selling price $75.00
$ 64.00 $ 66.00 Variable expenses: Direct materials 22.50 15.00 12.00 Other variable expenses 22.50 33.00 34.20 Total variable expenses 45.00 48.00 46.20 Contribution margin $ 30.00 $ 16.00 $ 19.80 Contribution margin ratio 40 % 25 % 30 %Explanation / Answer
a) Product Product Product A B C Direct materials Required per unit 22.5 15 12 Cost per pound 3 3 3 Pounds required per unit 7.5 5 4 Contribution margin per unit 30 16 19.8 contribution margin per pound 4 3.2 4.95 b) product A Second Product B Third Product C First c) Maximum Contribution margin 25,020 pounds units per unit total contribution Cont. Product C 3600 900 19.8 17820 product A 1800 240 30 7200 maximum contribution margin 25020
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