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

Given the tapping machine constraint, which product should be emphasized?

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?

maximum amount per hour

Product

C D E   Selling price $ 85 $ 65 $ 95   Variable costs $ 60 $ 50 $ 65   Fixed costs 25 8 22   Tapping machine time (minutes) 20 5 5

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

C D E a-2.

Given the tapping machine constraint, which product should be emphasized?

b.

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?

maximum amount per hour

Explanation / Answer

1 C D E Selling Price 85 65 95 Variable Cost 60 50 65 Contribution 25 15 30 Time requires 20 5 5 Contribution per minute 1.25 3 6 2. we have 2700 minutes of tapping machine, Product E is giving higher contribution 6/- Per minute, company should emphasize on product E 3 Company earning 6/- per minute in Product E if not filled up the demand Maximum amount per hour can be pay by company (6*60) = 360

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