Selling price s 70 50 $ 60 Variable expenses Direot materials 21.0015.00 4.20 Ot

Question

Selling price s 70 50 $ 60 Variable expenses Direot materials 21.0015.00 4.20 Other variable expensos Total variable expenses Contribution margin Contribution margin ratio 21.00 42.00 $28.00 22.50 37.50 $12.50 37.80 42.00 $18.00 40% 25% 30% Demand for the company's products is very strong, with far more orders each mor produce with the available raw materials. The same material is used in each product. The ma per pound with a maximum of 4,500 pounds available each month th than the company can terial costs $8 Required: a. Compute contribution margin per pound of materials used. (Round your intermediate and final answers to 2 decimal places.) Contribution Margin per Pound Product A Product B Product C b. Which orders would you advise the company to accept irst. those for A, for B, or for C? Which orders second? Third? Product A Product B Product C

Explanation / Answer

a) Contribution margin per pound Product A $         10.67 Product B $            6.67 Product C $         34.29 Explanation A B C Contribution margin $         28.00 $    12.50 $    18.00 Pounds required for each product (Material cost/ per pound cost)           2.6250      1.8750      0.5250 Contribution per pound $         10.67 $       6.67 $    34.29 b) Product A Second Product B Third Product C First (Product with highest contribution per pound need to be produced first.

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