Question

Benoit company produces three products, a, b, and


c. data concerning the three products follow (per unit): product a b c selling price $ 80 $ 56 $ 70 variable expenses: direct materials 24 15 9 other variable expenses 24 27 40 total variable expenses 48 42 49 contribution margin $ 32 $ 14 $ 21 contribution margin ratio 40 % 25 % 30 % demand for the company's products is very strong, with far more orders each month than the company can produce with the available raw materials. the same material is used in each product. the material costs $3 per pound with a maximum of 5,000 pounds available each month. required: 1. compute contribution margin per pound of materials used. (round your answers to 2 decimal places.) 2. which orders would you advise the company to accept first, those for a, for b, or for c

Answer 1

Answer:

1. Contribution margin per pound

Product A = $4.00

Product B = $2.80

Product C = $7.00

2. Orders for product C should be accepted first as they yield the highest contribution margin, followed by product A, then Product B which have the second highest and least contribution margin respectively.

Explanation:

Given the following ;

selling price $ 80 $ 56 $ 70 variable expenses: direct materials 24 15 9

other variable expenses 24 27 40

total variable expenses 48 42 49 contribution margin $ 32 $ 14 $ 21 contribution margin ratio 40 % 25 % 30 %

Kindly see attached picture for detailed explanation.

Answer 2

Answer:

a) Contribution margin pound; $4.00 $2.80 $7.00

b) The company should order C then A then B

Explanation:

Justification on question (b)

Order C is advised be order by the company because it will yield the best then followed by Order A and then lastly Order B.

Kindly see my attached picture for detailed explanation on question (a).