Exercise $11-12$ Volume Trade$-$Off Decisions $[$LO$11-5]$

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

Product

A B C

Selling price $

$84\mathrm{.}00$

$ $70\mathrm{.}00$ $ $74\mathrm{.}00$

Variable expenses:

Direct materials $25\mathrm{.}2021\mathrm{.}009\mathrm{.}00$

Other variable expenses $25\mathrm{.}2031\mathrm{.}5042\mathrm{.}80$

Total variable expenses $50\mathrm{.}4052\mathrm{.}5051\mathrm{.}80$

Contribution margin $ $33\mathrm{.}60$ $ $17\mathrm{.}50$ $ $22\mathrm{.}20$

Contribution margin ratio $40\%25\%30\%$

The company estimates that it can sell $750$ 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?