The following information applies to the products of Benson Company: One unit of
ID: 2553364 • Letter: T
Question
The following information applies to the products of Benson Company:
One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 5 hours of labor to produce. Due to labor constraints, demand is higher than the company’s capacity to make both products.
b)The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products. Expected sales of Product A and Product B are 14,000 units and 13,000 units, respectively.
c)The maximum number of machine hours available is 43,000. Product A uses 3 machine hours, and Product B uses 10 machine hours. The company can sell all the products it produces.
Product A Product B Selling price per unit $ 18 $ 16 Variable cost per unit 15 11a)
One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 5 hours of labor to produce. Due to labor constraints, demand is higher than the company’s capacity to make both products.
Product A Product B Contribution margin per labor hour Which product should be produced?b)The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products. Expected sales of Product A and Product B are 14,000 units and 13,000 units, respectively.
Product A Product B Total contribution margin Which product should be sold?c)The maximum number of machine hours available is 43,000. Product A uses 3 machine hours, and Product B uses 10 machine hours. The company can sell all the products it produces.
Product A Product B Total contribution margin per machine hour Which product should be produced?Explanation / Answer
a.
Which product should be produced - Product A (as contribution margin per labour hour is higher)
b.
Which products should be sold - Product B (as contribution margin is higher)
c.
Which product should be produced - Product A (as contribution margin per machine hour is higher)
Product A Product B Selling price per unit 18 16 Variable cost per unit 15 11 Contribution margin per unit 3 5 Labour hours required per unit 1 5 Contribution margin per labour hour 3 1Related Questions
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