Benoit Company produces three products, A, B, and C. Data concerning the three p

Question

Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): 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 $8 per pound with a maximum of 4,000 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.) b. Which orders would you advise the company to accept first, those for A, for B, or for C? which orders second? Third?

Explanation / Answer

A

B

C

(a)

Direct materials required per unit

$21.00

$15.00

$4.20

(b)

Cost per pound

$8.00

$8.00

$8.00

(c)

Pounds required per unit (a) ÷ (b)

2.63

1.88

0.53

(d)

Contribution margin per unit

$28.00

$12.50

$18.00

Contribution margin per pound of materials used (d) ÷ (c)

$10.66

$6.65

$33.96

A

B

C

(a)

Direct materials required per unit

$21.00

$15.00

$4.20

(b)

Cost per pound

$8.00

$8.00

$8.00

(c)

Pounds required per unit (a) ÷ (b)

2.63

1.88

0.53

(d)

Contribution margin per unit

$28.00

$12.50

$18.00

Contribution margin per pound of materials used (d) ÷ (c)

$10.66

$6.65

$33.96

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