Question

Exercise 11-12 Volume Trade On Decisions [LO11-5) Benoit Company produces three products-A.B. and C. Data concerning the three products follow (per unit $25.00 GB $66.ee 22.58 Selling price Variable expenses Direct materials other variable expenses total variable expenses Contribution margin Contribution margin ratio 34.28 48.88 45.00 $38.88 $19.88 The company estimates that it can sell 900 units of each product per month. The same raw material is used in each product. The material costs $3 per pound with a maximum of 5.400 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 second? Third? 3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 5.400 pounds of materials Complete this question by entering your answers in the tabs below. Required Required 2 Required calculate the contribution margin per pound of the constraining resource for each product. (Round your answer places o g marground of the constraining resource 25

Answer 1

1.

	A	B	C
Contribution margin per unit	$30	$16	$19.80
Pounds per unit	22.50/3 = 7.5	15/3 = 5	12/3 = 4
Contribution margin per pound	30/7.5 = $4	16/5 = $3.2	19.80/4 = $4.95

2.

On the basis of contribution margin per pound, production preferred will be as under :

First	Product C
Second	Product A
Third	Product B

3.

Material used in making 900 units of product C = 900 x 4

= 3,600 pounds

Remaining materials will be used in making product A = 5,400 - 3,600

= 1,800 pounds

Production of product A = 1,800/7.5

= 240

Thus, no material will be left for producing product B

Contribution margin from product C (900 x 19.80)	17,820
Contribution margin from product A (240 x 30)	7,200
Total contribution margin	$25,020

kindly give a positive rating if you are satisfied with the solution. Please ask if you have any query related to the question, Thanks.