Benoit Company produces three products, A, B, and C. Data concerning the three p
ID: 2472335 • 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 $5 per pound with a maximum of 4,700 pounds available each month.
Compute contribution margin per pound of materials used for products A,B, and C. (Round your intermediate calculations and final answers to 2 decimal places.)
Product
A B C Selling price $ 70 $ 50 $ 60 Variable expenses: Direct materials 21.00 15.00 4.20 Other variable expenses 21.00 22.50 37.80 Total variable expenses 42.00 37.50 42.00 Contribution margin $ 28.00 $ 12.50 $ 18.00 Contribution margin ratio 40 % 25 % 30 %Explanation / Answer
Answer:
Calculation of Contribution Margin Per Pound of materials used for Product A, B and C
Product
A
B
C
Contribution Margin Per Unit
$28
$12.50
$18
Material Requirement Per Unit in Pounds (note 1)
4.20
3.00
0.84
Contribution margin per pound of material used
(Contribution margin per unit / Material Requirement Per Unit in Pounds)
$6.67
$4.17
$21.43
Note 1 -- Calculation of Direct Material in Pounds requirement for each product
Product
A
B
C
Direct Material Cost Per Unit
$21
$15
$4.20
Material Cost Per Pound
$5
$5
$5
Requirement of Material Per Unit in pounds
(Direct Material Cost / Material Cost per pound)
4.20
3.00
0.84
Product
A
B
C
Contribution Margin Per Unit
$28
$12.50
$18
Material Requirement Per Unit in Pounds (note 1)
4.20
3.00
0.84
Contribution margin per pound of material used
(Contribution margin per unit / Material Requirement Per Unit in Pounds)
$6.67
$4.17
$21.43
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