1.Benoit Company produces three productsA, B, and C. Data concerning the three products follow (per unit):

	Product
	A	B	C
Selling price	$ 84.00	$ 66.00	$ 74.00
Variable expenses:
Direct materials	25.20	18.00	9.00
Other variable expenses	25.20	31.50	42.80
Total variable expenses	50.40	49.50	51.80
Contribution margin	$ 33.60	$ 16.50	$ 22.20
Contribution margin ratio	40%	25%	30%

The 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 $3 per pound with a maximum of 5,700 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 5,700 pounds of materials?

2.Polaski Company manufactures and sells a single product called a Ret. Operating at capacity, the company can produce and sell 46,000 Rets per year. Costs associated with this level of production and sales are given below:

	Unit	Total
Direct materials	$ 20	$ 920,000
Direct labor	6	276,000
Variable manufacturing overhead	3	138,000
Fixed manufacturing overhead	7	322,000
Variable selling expense	2	92,000
Fixed selling expense	6	276,000
Total cost	$ 44	$ 2,024,000

The Rets normally sell for $49 each. Fixed manufacturing overhead is $322,000 per year within the range of 38,000 through 46,000 Rets per year.

Required:

1. Assume that due to a recession, Polaski Company expects to sell only 38,000 Rets through regular channels next year. A large retail chain has offered to purchase 8,000 Rets if Polaski is willing to accept a 16% discount off the regular price. There would be no sales commissions on this order; thus, variable selling expenses would be slashed by 75%. However, Polaski Company would have to purchase a special machine to engrave the retail chains name on the 8,000 units. This machine would cost $16,000. Polaski Company has no assurance that the retail chain will purchase additional units in the future. What is the financial advantage (disadvantage) of accepting the special order? (Round your intermediate calculations to 2 decimal places.)

2. Refer to the original data. Assume again that Polaski Company expects to sell only 38,000 Rets through regular channels next year. The U.S. Army would like to make a one-time-only purchase of 8,000 Rets. The Army would reimburse Polaski for all of the variable and fixed production costs assigned to the units by the companys absorption costing system, plus it would pay an additional fee of $1.80 per unit. Because the army would pick up the Rets with its own trucks, there would be no variable selling expenses associated with this order. What is the financial advantage (disadvantage) of accepting the U.S. Army's special order?

3. Assume the same situation as described in (2) above, except that the company expects to sell 46,000 Rets through regular channels next year. Thus, accepting the U.S. Armys order would require giving up regular sales of 8,000 Rets. Given this new information, what is the financial advantage (disadvantage) of accepting the U.S. Army's special order?