3 Benoit Company produces three products-A. B, and C. Data concerning the three

Question

3 Benoit Company produces three products-A. B, and C. Data concerning the three products follow (per unit Product $85.00 $6e.00 $82.e8 27.20 15 8.0e Selling price ts Variable expenses: Direct materials Other variable expenses Total variable expenses 27.20 33 53.se 54.48 48 61.5e Print contribution margin .60 $12.00 s2e.sa Contribution margir 36% 2e% 25% ratio company estimates that it can sell 850 units of each product per month. The same raw material is used in each product. The material costs $4 per pound with a maximum of 5,100 pounds available each month. Required 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Which orders would you advise the company to accept first, those for A, B. or C? Which orders secod? Third? 3. What is the maximum contribution margin that the company can earn per month If it makes optimal use of its 5,100 pounds of materials? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3

Explanation / Answer

PRODUCT A PRODUCT B PRODUCT C Direct Material 27.2 15 8 Material Price per pound 4 4 4 Material Requirement in pounds 6.8 3.75 2 PRODUCT A PRODUCT B PRODUCT C Selling Price 85 60 82 Less: Variable Cost Direct Material 27.2 15 8 Other variable expense 27.2 33 53.5 Contribution margin per unit 30.6 12 20.5 Raw material required per unit in pounds 6.8 3.75 2 Contribution margin per pound of material 4.5 3.2 10.25 Ranking(in order of highest contribution per pound) II III I Req 1: PRODUCT A PRODUCT B PRODUCT C Contribution margin per pound of material 4.5 3.2 10.25 Req 2: Product Order Product A Second Product B Third Product C First Req 3: Total Material available 5100 pounds Less: Used for Production of ProductC 1700 pounds (850 units of Product C @ 2 pounds per unit) Remaining raw material 3400 pounds (to be used in production of Product A) Material req per unit of Product A 6.80 pound Number of units produced of Product A 500 units (3400 pounds/ 6.80 pounds) Therefore, Number of units produced as under Product A 500 units Product B Nil Product C 850 units PRODUCT A PRODUCT B PRODUCT C Total Number of units produced 500 0 850 Contribution per unit 30.6 12 20.5 Total Contribution Margin 15300 0 17425 32,725 Maximum Contribution Margin $32,725

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