Wright, Inc. produces three products. Data concerning the selling prices and uni

Question

Wright, Inc. produces three products. Data concerning the selling prices and unit costs of the three products appear below:

Product

Fixed costs are applied to the products on the basis of direct labor hours. Demand for the three products exceeds the company's productive capacity. The tapping machine is the constraint, with only 2,700 minutes of tapping machine time available this week.

Calculate the contribution margin per minute for all three products. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

Given the tapping machine constraint, which product should be emphasized? Support your answer with appropriate calculations.

Assuming that there is still unfilled demand for the product that the company should emphasize in part (a) above, up to how much should the company be willing to pay for an additional hour of tapping machine time? (Omit the "$" sign in your response.)

Product

C D E   Selling price $ 60 $ 40 $ 70   Variable costs $ 30 $ 20 $ 35   Fixed costs 20 5 17   Tapping machine time (minutes) 15 5 7

Explanation / Answer

Answer:a-1

Answer:a-2 Product E should be emphasized because it has the greatest contribution margin per unit of the scarce resource.

Answer:b If additional tapping machine time would be used to produce more of Product E, the time would be worth 54 × $5 = $270 per hour

Product Particulars C D E Selling price 60 40 70 Less: variable costs 30 20 35 Contribution Margin 30 20 35 Tapping machine time (minutes) 15 5 7 contribution margin per minute 2 4 5

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