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): 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 $7 per pound with a maximum of 5,800 pounds available each month.

compute contribution margin per pound of materials used for the product A, B, C

Which orders would you adivse the company to accept first, second, and third?

Explanation / Answer

Working Note

Particulars A B C Selling Price (A) 100 80 90 Less: Variable Expenses Direct Materials 30 24 6.3 Other Variable Expenses 30 36 56.7 Total Variable Expenses (B) 60 60 63 Contribution Margin C = (A-B) 40 20 27 Material Required per Unit (D) - Working Note 4.29 3.43 0.9 Contribution Margin Per Pound 9.32 5.83 30 Rank Second Third First

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